The Goods and Services Tax, or GST, was introduced in India on July 1, 2017, as a reformed indirect tax structure that effectively replaced all the existing indirect taxes such as sales tax and VAT. GST is a consumption-based tax levied on the supply, purchase, transfer, lease and/or import of relevant goods and services as instructed by the GST regulatory of India.
Now, services like blogging, affiliate marketing, and YouTube videos should also be taxable under the GST provision, but are they? Let’s find out about GST applicability to affiliate marketing, freelancing and blogging services and its impact on online bloggers, freelancers and YouTubers in India.
Bloggers and Affiliate Services under GST
As per GST rules, blogging and affiliate services fall under OIDARS (online information and database access or retrieval services) which include all kinds of electronic services such as digital promotion, blogging, online advertising, cloud and digital data storage services, online content like e-books and movies, information transfer, online gaming, etc. These services are mandatorily under the GST ambit and are therefore required to pay taxes according to the standard GST rules. Continue reading to find out more.
Also Read: GST impact on IT Sector
GST Registration for Online Service Providers
GST registration is mandatory for all types of online services providers, including bloggers, freelancers and affiliate marketers, given that they fulfil the following conditions.
- Annual turnover is more than Rs 20 lakh (Rs 10 lakh for the Reserved States)
- Eligibility (Any of the following conditions)
- The person/company is involved in the online selling of information or database access/retrieval services within India.
- The person/company is involved in the online selling of information or database access/retrieval services to an unregistered person in India from an outside country (Import of information by an unregistered person).
- The person/company is involved in the online selling of information or database access/retrieval services from India to an outside country (Export of information).
As you can see, GST registration is mandatory for all service providers who make an annual sale of worth more than Rs 20 lakh, irrespective of their locations. However, GST applicability rules depend on the location of the services provider.
GST Rates for Online Professionals like Bloggers, Freelancers & Youtubers
The following online professionals (service providers) will have to register and pay GST if their annual income from online services exceeds Rs 20 lakhs.
Applicable GST rates on affiliate marketers, bloggers, freelancers and YouTubers are:
Bloggers who are involved in creating and running online blogs and earn by displaying ads or through affiliate commission or any other way from blogging are required to pay GST at the rate of 18%.
Freelancers, including designers, developers, bloggers, online marketers, who are involved in providing services online have to pay GST @ 18% on their earnings.
YouTubers who earn by displaying ads on their online videos are also required to pay 18% GST on their income.
E-commerce site owners who earn by selling goods or services online will pay GST @18%
Other affiliate marketers, including freelance digital marketers, are also under 18% GST slab.
All these professionals will charge GST from their clients on the cost of services provided to them and then pay the same to the government.
Penalty on Non-Compliance
If an eligible blogger or freelancer does not register for GST and pays tax on time, they will be charged penalties as follows:
- Penalty on Non-Registration – Rs 25,000
- For short or non-payment of tax- 10% of the due tax amount subject to min Rs 10,000
- For late GST return filing – Rs 100 per day from the last date of return filing
- For evading tax or committing GST fraud – 100% of the due (evaded) tax amount subject to min Rs 10,000
GST on Export of Online Services
Professionals who reside in India and sell or provide online services to individuals/companies located outside India will have to register for GST (if annual turnover is over Rs 20 lakh), however, there is no GST on the export of such online services. These professionals are still required to register and file 0% GST Returns as per the rules but need not to pay any tax. Following are some examples of export of online services that are free from GST.
- Affiliate marketing where the money comes from outside of India through PayPal or bank transfer.
- Adsense income
For an online service supply to be considered export, the place of supply & recipient must be outside India.
Input Credit (ITC) for GST-registered Online Service Providers
If you are a GST-registered supplier of online services and pay GST on your income, you are also eligible to get input credit of GST paid on the expenses incurred for running the business.
For example, if you are paying Rs 18 GST for using Google’s Ad Services worth Rs 100, you will get that Rs 18 back when filing your GST return. The refund (ITC) amount will be deducted from your actual GST liability and you will only have to pay the remaining tax amount.
To be able to avail ITC, be sure to provide your GST number to all online companies from where you are purchasing input services/goods for your online business.
Use Gen GST Software for the easy and error-free filing of your GST returns. The software can also be used to get GST-compliant invoices to be given to your clients. GST invoices are mandatory for all online services for which you are charging GST from your clients and paying tax to the government.