From productive work to unproductive work, everything is digitalized today. The whole world is in a rush to earn money through online platforms. Social media influencers are increasing in numbers rapidly. Most people started to earn through one of the famous social media platforms that is YouTube as additional source of income. Besides starting a YouTube channel, a YouTuber must also know the impact of GST.
In this article we are only dealing with GST implication on the share of advertisement revenue that is paid out by YouTube (Google AdSense) to content creators. Let us understand this in a better way with an example.
Example for earning through Google AdSense
Ms. Prerana being an individual is a content creator located in India. She creates video and uploads in her YouTube channel. She meets the threshold set by YouTube and she is eligible for monetization. Based on the algorithm, YouTube plays the advertisement in her channel. As per the monetization, YouTube pays to Ms. Prerana on monthly basis through Google AdSense Account. Let us assume Ms. Prerana earns Rs 25 lakhs for the year through Google AdSense. Now the question is whether GST is applicable to the amount received through Google AdSense .
Before we jump into the GST implication, we should understand what is the nature of supply, who is the supplier, who is the recipient, and where is the place of supply.
Nature of supply
As per Section 2(17) of the IGST Act, “online information and database access or retrieval services” (OIDAR) means services whose delivery is mediated by information technology over the internet or an electronic network and impossible to ensure in the absence of information technology and includes electronic services such as,–
(i) advertising on the internet;
(ii) providing cloud services;
(iii) provision of e-books, movie, music, software and other intangibles through telecommunication networks or internet;
(iv) providing data or information, retrievable or otherwise, to any person in electronic form through a computer network;
(v) online supplies of digital content (movies, television shows, music and the like);
(vi) digital data storage; and
(vii) online gaming;
In the given case, being advertisement placed in Prerana’s channel is considered as online information and database access or retrieval services.
Supplier and Recipient of service
YouTube plays the advertisement in the channel of youtuber. Here content creator provides the space to play the advertisement. So, the content creator is the supplier of service. YouTube will be the recipient of service.
The companies whose ads are hosted on blog or YouTube do not directly interact with the blogger. Advertisements are played by the companies who pay to Google directly. Payments are made by Google AdSense to the blogger. The blogger does not raise an invoice, even though he acts as a supplier.
Place of supply
In terms of section13(12) read with section2(17) of the IGST Act, this service shall be online information and database access or retrieval services and the place of supply shall be the location of the service recipient.
In this case the Service Recipient is Google(YouTube) which is located outside India.
Export of service
Further in terms of section.2(6) of the IGST Act, to qualify as zero-rated supply/ export of service few other conditions shall be complied which shall be as below:
a) The supplier of service is located in India
b) The recipient of service is located outside India
c) The place of supply is located outside India
d) The payment for such service has been received in convertible foreign exchange
e) The supplier and recipient are not merely establishments of a distinct person.
The supplier of service shall be the channel owners in India, the recipient shall be Google which is outside India, place of supply as determined above shall be outside India. AdSense earnings are in foreign currency but they are remitted in Indian Rupees. The Conversion rate is shown in the bank account statement. and they are not establishments of distinct persons. With the above, it shall qualify for export of services and thus zero-rated supplies.
GST registration requirement
As per the section 22 of CGST ACT, every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:
Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees.
Further Section 24(i) of CGST ACT requires compulsory registration of person who is making any inter-state taxable supply of goods or services even if his aggregate turnover does not exceed threshold limit. As per the section 7(5) of IGST ACT, supply of goods or services or both shall be treated to be the supply in course of inter state trade or commerce when the supplier is located in India and place of supply is outside India. Hence export of service is considered as Interstate supply.
However Central Government vide Notification No. 10/2017 – Integrated Tax dated 13th October, 2017 has exempted the persons making inter-State supplies of taxable services and having an aggregate turnover not exceeding an amount of Rs. 20 lakhs in a financial year from obtaining registration. However, for the special category States aggregate turnover limit should not exceed Rs. 10 lakhs for availing exemption from registration.
In the given example Ms. Prerana earns Rs 25 lakhs from the said service, which exceeds the threshold limit, she is liable to get GST registration.
If the Google AdSense earning is bellow threshold limit which is mentioned in the section 22 of CGST ACT, GST registration is not required.
After the registration she has two options-
Option 1: Export of service (to AdSense) by charging IGST @18% and then claiming refund
Option 2: Export of service (to AdSense) without charging and furnishing Letter of Undertaking (LUT)
Disclaimer: The above post is only for the purpose of academic discussion and should not be construed as any legal opinion in any matter whatsoever.