Introduction
Over the last three years, YouTube has paid its creators more than $50 billion dollars through the YouTube Partner Program. No doubt, the tax implication of such amount cannot be ignored. YouTube pays creators several ways, with advertisement revenue being the most significant amongst all pay-outs. Brands have found that working with content-creators has not only helped market their products and services to a wider audience but made their brand more trusted by customers thanks to the creators’ “influence”.
This article aims to allude at the nature of services provided by content-creators on YouTube, more specifically the service of allowing advertisements on their content and the GST implications of the same.
Nature of Services provided by content creators
Like any other good or service, it is essential to understand whether the service provided by content-creators constitute taxable supply[1] or not. As per section 7 of the CGST Act, taxable supply includes the supply of goods or services (not subject to exemption under the Act) , made for consideration in the course or furtherance of business, by a taxable person in a taxable territory.
YouTubers provide services via the internet by posting videos and content on their channel with monetisation and providing a platform for advertising. As per Section 2(17) of the IGST Act[2], such services are known as Online Information Database Access and Retrieval service (OIDAR). In essence it constitutes services provided through the medium of internet and received by the recipient online without having any physical interface with the supplier of such services.
Due to the unique nature of such service, the government has introduced a unique treatment compared to more traditional services as well a simplified scheme of registration for such service providers located outside.
Place of Supply of services provided by content creators
For taxability of OIDAR, the place of supply in respect of the subject supply should be in India. The general rule under Section 13 of the IGST Act is that the place of supply of services is the location of recipient of services.
Where both the supplier and the recipient of such service is in India, the place of supply would be the location of the recipient of service i.e., it would be governed by the default place of supply rules.[3]
Likewise, where the supplier of service is located outside India and the recipient is located in India (Registered person), the place of supply would be India and liable to GST. Here the taxability is via Reverse Charge Mechanism wherein the end customer pays tax directly to the government. For instance, where a YouTube blogger located in UK creates sponsored content for a brand located in India, the Indian company would be obliged to pay tax under RCM and allowed to avail the tax paid as credit, subject to other conditions. This is to ensure that foreign suppliers do not have an unfair tax advantage should the services provided by them be left out of the tax net. Moreover, since the service providers are located outside of India, such mechanism, simplifies compliance.
However, concerns arise as to how tax would be collected when the recipient in India is an individual consumer, but the supplier is located abroad. In such cases it would be impractical to ask the individual in India to register and undertake the necessary compliances under GST for a one-off purchase on the internet. For such cases the IGST Act provides that on supply of OIDAR by any person located in a non-taxable territory and received by a non-taxable online recipient, the supplier of services located in a non-taxable territory shall be the person liable for paying integrated tax on such supply of services.
Lastly, in cases where the location of supplier is in India, but the location of recipient is outside India, then there is no taxability under the IGST Act[4], because it qualifies as zero rated supply in terms of Section 16 of IGST Act.
Thus, from a conjoint reading of the above provisions, the legal position is as follows:
| S.no | Location of Supplier and Recipient of OIDAR Services | Tax liability |
| 1. | Where registered domestic supplier provides OIDAR services to unregistered persons. | Domestic Supplier |
| 2. | Where registered domestic supplier provides OIDAR services to registered person | Domestic Supplier |
| 3. | Where an unregistered domestic supplier provides OIDAR services to registered persons. | Registered Person |
| 4. | Where Foreign Supplier is supplying OIDAR services to Registered Person | Registered Person |
| 5. | Where Foreign Supplier is supplying OIDAR services to unregistered person in India. | Foreign Supplier |
Nature of Services in Sharing of Advertisement Revenue
As discussed earlier, advertisement revenue is one of the most significant way content creators earn on YouTube. Once a creator meets the threshold set by the YouTube Partner Program, the content creator would be eligible to monetise their videos and thereby eligible for a share of advertisement revenue earned by YouTube.
Advertisements are placed on YouTube videos via Google AdSense therefore the recipient of services being Google Asia Pacific, Singapore and the supplier of service being the youtuber located in India. Hence the place of supply will be that of the recipient, outside India.[5]
Furthermore Sec 2(6) of IGST Act which lays down the conditions for ‘export of services’ as follows:
- the supplier of service is located in India.
- the recipient of service is located outside India.
- the place of supply of service is outside India.
- the payment for such service has been received by the supplier of service in convertible foreign exchange [or in Indian rupees wherever permitted by the Reserve Bank of India]; and
- the supplier of service and the recipient of service are not merely establishments of a distinct persons.
Thus, if the above criteria are met, it can be concluded that the services provided by a youtuber, can be classified as ‘export of services’ and be considered as zero-rated supply in accordance with Section 16 of IGST Act. Section 16(3) allows refund of input tax credit that has been accumulated by the service provider who gets engaged in provision of zero-rated supplies.
However, it is to be noted that, irrespective of their being no requirement of paying GST, he is mandated to obtain a registration in light of provisions of Section 24 of CGST Act. If the total turnover of a Youtuber exceeds Rs 40 lakh in a financial year or Rs 20 lakh (in cases of special category states), GST registration is mandatory.
Conclusion
Content creating today is one of the most lucrative industry though often overshadowed by the preference over traditional careers. Nonetheless its GST implications cannot be ignored. As introduced by the erstwhile service tax regime and continued in today’s GST regime, the act of providing monetary services via YouTube Videos is classified under Online Information Database Access and Retrieval services or OIDAR services.
However, advertisement revenue earned through Google AdSense that forms a major portion of a Youtuber’s revenue is not taxed at all under GST, being classified as zero rate supplies. In the author’s opinion, this practice requires a reform as although technically the recipient of services is google AdSense, located outside of India, the advertisements often shown to the Indian audience are of Indian Brands, indirectly benefiting them. Thus, this revenue cannot be ignored from tax liability.
Moreover, several countries are aiming to bring in more tax of other form of revenue, taking advantage of the highly lucrative platform of YouTube. For instance, The South Korean government has recently introduced a bill to make Internet Service Providers (ISPs) legally bound to charge a delivery fee every time their consumers access any content. Though, content creation is popular due to its low taxability, its growth and revenue cannot be ignored by the government.
[1] The Central Goods and Services Tax Act § 7
[2] The Integrated Goods and Services Tax Act, 2017 § 2(17).
[3] The Integrated Goods and Services Tax Act, 2017 § 13(12)
[4] The Integrated Goods and Services Tax Act, 2017 § 17
[5] The Integrated Goods and Services Tax Act, 2017 § 13
Author Bio
Really appreciate your article. One question registration should be taken under Normal Taxpayer or OIDAR category.