With the emergence of SOCIAL MEDIA not only the world has become a small global village but also people have turned their hobbies into business. Since social media is a large platform where people interact on daily basis which has not only increased the network of a person but has also given wider stage for business activities.
Many people have started promoting their products on social media. Infact work from home has also taken a jump. Hobbies like baking, handmade eatables, personalized gifts (including cards, scrapbooks, flower jewellery, handpainted items etc), beauty advices, cooking advices, health and fitness advices, other consultancy services have become source of income for many. Growing economy in different aspect sounds lucrative but what about taxes? Unknowingly or knowingly people ignore taxes. This article decodes different types of taxes applicable for the supply of goods and/or services by a person through social media.
GST– Yes, different supplies of goods or services might attract GST. For obtaining registration one need not to have a commercial property, it can be the address of the residence also.
For example, Mr. A is selling handmade cards through his own website then he is not bound to get himself compulsorily registered under GST.
In case of suppliers over social media they directly contact the buyer and collect payments directly without having social media as mediator in all this respect except for the fact that seller is introduced with the buyer on such social media. Hence there is no deduction of TCS by social media therefore such supplier does not fall in this category as well for compulsory GST registration. Now such supplier will follow the criteria covered in section 22 and section 23 of the Act which is otherwise applicable for all suppliers.
For example, Mr. A sold handmade paper mache non electric bell hanging to a person of another state worth Rs.10000/- since he sold a good is he liable to get registration under GST? No, he is not liable as the good is eligible for exemption stated above subject to threshold limit for the year taken into account
For example, Mr. A owns a small readymade garment shop in a small town but he is very active on social media promoting his product, seeing one of his dress Mr. B of another state placed an order of Rs.5000 with him. Is Mr. A liable to get GST registration if he accepts the order? Yes, Mr. A is liable to get GST registration as the item is neither handicraft nor notified product and sale is inter-state and as per above notification he is not covered under such notification.
For example, Mr. B of Bombay places an order with Mr. A of Rajasthan for delivery of leather purses and leather flip-flops total worth of Rs. 200000/- which are very famous craftsmen’s work in Rajasthan. Since these are notified goods and does not exceed threshold limit, Mr. A is not liable for compulsory registration under GST.
For example, Mr. A is appointed by a artificial jewellery shop owner to sell his product on percentage basis of the turnover. Mr. A puts pictures of the jewellery on his social media account and attracts buyers. Mr. A’s job is to only get buyers to the jewellery shop. Payment and billing is done directly by the jewellery shop owner to the customer and Mr. A is only procurement agent and hence not covered in section 2(5) of CGST Act.
For example, Mr. A is agent of Mr. B for selling his artificial jewellery. Mr. A puts pictures of the jewellery on his social media account and attracts buyers. Here Mr. A takes the delivery from Mr. B and sells it to end consumer under his name. Mr. A bills the consumer under himself and collect the payment from consumer then Mr. A is covered under section 2(5) of CGST Act.
1. He may export the goods upon payment of IGST and claim refund of such tax paid or
2. He may export under a Letter of Undertaking, without payment of IGST and claim refund. Refund is not eligible if goods exported are subjected to export duty or if the supplier avails of drawback in respect of central tax.
Thus, supplier of goods or services covered under export have to get themselves registered under GST only if supplier is of taxable services then Central Government has granted exemption from registration to person making such supplies of taxable services having aggregate turnover not exceeding Rs.20 lakhs/ Rs. 10 lakhs in special category states.
1. Whether provisions of service mediated by information technology over the internet or an electronic network.
2. Whether it is automated and impossible to ensure in the absence of information technology.
– Supplies of goods, where order is taken online
– Online advisory services through emails -Teaching where the content is provided over the internet
– Booking services or tickets etc.
– No ITC will be available for the purchase of material used in making of the final product (GST paid on items used to bake cake, sheets, coloring items, fancy items used for making personalized gifts etc)
– Supply of goods will be limited to intra-state and services also subject to the conditions mentioned earlier.
– Difficulty in registering to the business columns over social media without GSTIN. As nowadays social medias have business groups and pages.
When you turn your hobby into business it’s no more far away from the eyes of Income tax. Yes you heard that right. Income earned from such sales is chargeable to income tax after deducting expenses related to the same. Expenses can be anything used in the process while making final product like Raw material, Internet expenditure, Phone recharges, Electricity expenses, Conveyance expenses (home delivery), Depreciation on the related assets like phone, printer, computer, cooking appliances etc.
For example, Mr. A bakes cake and sells it from home. The price of the cake is 700. The material used in batter is of Rs.200 and delivering it costs Rs.50 then the income from such sale is Rs.450 which is chargeable to tax. From such amount he can also claim depreciation on mixers or blenders, refrigerators used in his business.
Such incomes are usually charged under the head Profit and Gain from Business and Professions. If any income is in the nature of salary then show such income in salary heads (Form 16). At last if income earned does not fall under above it falls under Income from Other Sources.
Such persons are not deprived of taking benefits of deduction under Chapter VI on their investment. Just like every other assessee such income earners can claim deductions, carry forward losses, claim income tax refund etc subject to respective conditions.
|Deductions under Chapter VI||(xx)|
Following provisions or compliances are applicable to such suppliers in the same way as otherwise applicable to every other assessee
1. Provisions of TDS and TCS are applicable to such supplier as defined in the Income Tax Act without any modifications or special exemptions.
2. Income Tax Return filing applicability.
3. Maintenance of books of accounts (section 44AA and rule 6F) and tax audit (section 44AB).
4. Alternate Minimum Tax, Clubbing of Income provisions.
5. Advance Tax as per section 208.
6. Any other provisions as otherwise applicable.
Equalisation levy– Sum received or receivable by NR who does not have PE in India for the specified services by a resident carrying on business or profession or NR having PE in India then 6% of amount shall be deductible from consideration paid or payable for specified services if the aggregate consideration exceeds Rs.1 lakhs. Specified services such as Online advertisements, provisions for digital advertising space or any other facility or service for online advertisements or any other service notified by the government.
For example, If a cake selling person from home advertises its cake say via facebook then he will be liable to pay 6% EL subject to conditions.
Disclaimer: The contents of this article are for information purposes only and does not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up. The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.