June 25, 2017

Are all Indian blogs impacted by new GST taxation law? Questions answered



Indian blogs and GST

Brief points about Goods and Services Tax and why this post


India has ushered in a massive indirect tax reform by introducing GST in place of a number of indirect taxes that were being levied till now. It is applicable throughout India. The erstwhile sales tax, service tax, excise duty, etc all are subsumed into it.

There is clarity about GST applicability and rates when people and firms do traditional businesses. Blogging is mostly a very desegregated, individualized activity in which the blogger sells its blog space for selling his own or others' goods directly or through advertisements or other arrangements. The income streams are often varied and small, except for established bloggers who earn millions through blogging. There is a lot of confusion on many aspects of applicability of GST to blogging. Let's clear some cobwebs.


How is blogging in India impacted by GST?


Blogging is a service that the blogger provides. Under GST, being a service, it needs to be registered and taxed according to the applicable provision.

There is no doubt that blogging comes under GST. The income coming from advertisements, affiliation, sale of e-book/ software etc through the blog - all come under GST.


Provisions in GST relating to blogging


The following specific provisions of CGST/ IGST seem to relate to blogging: 

Section 24
The  following categories  of  persons  shall  be  required  to  be  registered under this Act:
xi) every  person  supplying  online  information  and  database  retrieval  services  from  a  place  outside  India  to a  person  in  India,  other  than  a  registered  person [etc]

Explanations (in different sections)
14. (1) On supply of online information and database access or retrieval services 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:
Provided that in the case of supply of online information and database access or retrieval services by any person located in a non-taxable territory and received by a non-taxable online recipient, an intermediary located in the non-taxable territory, who arranges or facilitates the supply of such services, shall be deemed to be the recipient of such services
from the supplier of services in non-taxable territory and supplying such services to the non-taxable  online  recipient  except  when  such  intermediary  satisfies  [etc]

(16) “non-taxable online recipient” means any Government, local authority, governmental authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory. 

(17) “online information and database access or retrieval services” means services whose delivery is mediated by information technology over the internet or an  electronic  network  and  the  nature  of  which  renders  their  supply  essentially automated and involving minimal human intervention 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;

16. (1) “zero rated supply” means any of the following supplies of goods or services
or both, namely:––
(a) export of goods or services or both; [etc]

This article in Economic Times tried to explain the matter, followed by similar others. What has happened is that instead of clarifying the doubts in the mind of blogger, these have made the matter even more confusing. 

This series of articles have said that
(i) if a blogger earns more than Rs 20 lakh (=2 million), he needs to register for GSTIN and pay GST [implying that those earning less need not pay GST];
(ii) the tax rate would be 18%; and
(iii) there would be no compensation (refund of tax credit etc).

The topic has been better discussed in a number of taxation websites and forums. We have contacted some CAs and also raised queries on some online forums to elicit answers to bloggers' questions. The general opinion is as follows (and there are different opinions on some aspects):
  • All bloggers who earn from their blogs come under the purview of GST as they are in the 'business' of providing services.
  • Having said that, it is not likely that the government would want students, housewives and part-time small earners to file 37 returns in a year and pay 18% of whatever little they earn. It is also unlikely that there would be a witch-hunt on that account.
  • However, when the earning of a blogger takes shape of business income earned by selling services, it would be necessary to register, pay GST and file returns. Such bloggers were already required to pay Service Tax @15%, now that rate turns into GST and goes up to 18%.
  • There are moderate to severe penalties for not registering, not filing returns, not paying tax and hiding income.
  • As of now (unless there is a clarification from CBEC or a case law decides against it), it is strongly felt that AdSense income will not invite GST, it being treated as export income because it is currently being received from Google Singapore in convertible value of foreign currency.
  • Incomes received from India-based affiliates, affiliate networks or advertisers would definitely come under GST. 
  • Payments received on sale of ebook, music, software, etc through the blog will definitely invite GST.
  • While some feel that Rs. 20 lakh limit is not relevant, some feel that it applies to blogging also and those earning less than Rs. 20 lakh a year need not register.
  • It does not matter whether you have an office or work on a laptop while sitting in your hostel room. If you earn income, it is taxable.

 

What should I do as a blogger?


If you are a small blogger and are earning a few bucks, do not panic. Concentrate on blogging and be alert. On this very blog, we'd keep updating bloggers about new clarifications on GST.

For Blogger blogs hosted by Google, the company has come out with a notice to update GST details and that in future its payment notices will be GST compliant. That should also not worry you. Update your details if it asks you for that. 

For your AdSense income below Rs. 20 lakh a year, sit back and keep alert about any clarifications.

If you make income through other sources using the blog, you should better consult a tax consultant. But don't panic. Consultants too are not sure about interpretation of different legal provisions and rules, so their advice too is not final.

Beware that Google may decide to start invoicing India-based advertisers and then paying India-based bloggers from their India office. If that happens, there may be invoices sent to you along with payments so that you calculate your GST liability. That may not happen soon.

This is just the beginning. There is a lot of mix-up and systems are not in place even for brick-and-mortar businesses. Things will take time to clear up. Government is already talking about a 2-month window for taking all businesses on board. Blogging will not be among the priority businesses.


DISCLAIMER

We are not tax experts. The opinions and suggestions given here are based on our understanding of GST's applicability to blogs based on our study of government documents, advice available on the web and advice sought individually from experts. Bloggers may take their own decisions and make sure that they do not break GST or any other law. 

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