Indian Adsense Publishers - Should We Pay Service Tax?

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  1. Sashi Kumar

    Sashi Kumar New Member

    I'm an adsense publisher and my income for the current year is likely to cross Rs. 10 lakh. I was wondering if service tax should be paid from my adsense income.

    I read an article by CA Karan Batra on where he has mentioned
    "AdSense users need to pay service tax on their earning from 1st October 2014"

    On the other hand, the following article says that service tax need not be paid since adsense income is considered as export of services and hence exempt.

    Which one is true? Should service tax be paid or not?
  2. Karan Batra

    Karan Batra Well-Known Member

    The above link shared by you says that service is being provided to Google which is based outside India which is not the case.

    Google Office is based in Bangalore. Google pays service tax which it earns from India operations through its bangalore office.

    Even if we assume that Google is based outside India - you must note that Google is only an agent and not the service receiver. The service receiver is the advertiser who may be based in India or outside India.

    All the big publishers have contacted their CA's and everyone is paying Service Tax.
  3. Karan Batra

    Karan Batra Well-Known Member

    The article also assumes that the payment is made in convertible foreign exchange whereas to Indian publishers - google always made the payment in Rupees.

    I've seen adsense since 2009 - and back then it used to make cheque payments in Rupees and now in makes payments via online transfers.
  4. Sashi Kumar

    Sashi Kumar New Member

    Hi Karan, thanks for your reply. Just to let you know, Google now make payments in convertible foreign exchange. For example, for the current month, in my adsense account currently, this is the description given for the "Payment in Process" line entry
    "Automatic payment in progress: Wire transfer to bank account...xxxx for ($xx,xxx.xx)
    Also, I've received the "Foreign Exchange Inward Remittance Certificate" from my bank for the past 3 months which confirms that the funds were received by my bank in US dollars and converted to INR by my bank at the exchange rate prevailing on that day.

    Just to double check, I also called my adsense account manager (my account is assigned an account manager) and confirmed with him that adsense indeed pays in convertible foreign exchange.

    This being the case, does my adsense income come under "Export of services" and hence exempt for collection/payment of service tax?

    Edit: I just saw your first reply. The first paragraph in the agreement with Google as shown in my adsense account indeed states that the agreement is with "You and Google Inc" which is the US parent of Google India. Also, having gone through the western union and vodafone case judgements mentioned in that blog post, it appears that the courts have ruled that the service recipient is the contractual entity, and not the third party which effectively consumes the services with whom we have no contractual relationship.

    Google charges service tax on Indian adwords advertisers because in this case the contract is between the adwords advertiser and "Google India Pvt. Ltd", the Indian subsidiary of Google Inc.
    Last edited: Apr 22, 2015
  5. Karan Batra

    Karan Batra Well-Known Member

    So you are saying that in case of Adwords - if the contract is between advertiser and Google US and not between advertiser and Google India - then service tax can be saved.

    Therefore, Google should enter into all agreements through the US entity which will inturn reduce the cost of advertising as Service Tax will not be levied. Even after reducing the rates, it wont impact google's profitability as it will reduce its tax liability as well.

    And when the prices go down, no. of advertisers will increase which in-turn will lead to more profitability for Google.
  6. Karan Batra

    Karan Batra Well-Known Member

    I understand that their is lack of clarity in this regard.

    The only person who can give clarity in this regard is Google itself but sadly it is not saying anything and is keeping silent.
    Sashi Kumar likes this.
  7. Karan Batra

    Karan Batra Well-Known Member

    Maybe, all google publishers should contact Google or maybe raise a voice on Twitter for clarity in this regard.
    Sashi Kumar likes this.
  8. Sashi Kumar

    Sashi Kumar New Member

    Karan, when it comes to adwords, Indian advertiser will still have to pay service tax under reverse charge mechanism if the contract is with Google USA; it's just that the liability of paying service tax will shift from the service provider to the service receiver if the contracting entity is Google USA instead of Google India. That is the reason why google bills adwords advertisers through the Indian entity - since in any case service tax has to be paid.
  9. Rohir Naik

    Rohir Naik New Member

    Hi Karan,Shashi Kumar. Google adsense has its office in india and so its taxable. See clause 2, which says: 2. the recipient of service should be located outside India.
    Shashi Kumar, try with other companies which dont have office in India, if below case is true.

    But What if the advertising agency is from outside India? and not Google Adsense.
    Karan i have similar issue here but my case is different.
    Please help me here is my case i posted on forum at charteredclub:

  10. Sashi Kumar

    Sashi Kumar New Member

    In the case of adsense there is a slight confusion when it comes to place of provision rules since there are three parties involved; adwords advertiser, adsense publisher and Google. However, in your case, there is no confusion at all since, as per place of provision rules, your place of provision is the service receiver's location, which is outside India.

    With regards to your point about Google adsense, M/s. Google Online India Private Ltd. and Google Inc. are two separate legal entities. The contracting entity for Indian Adsense publishers is Google, Inc USA and not M/s. Google Online India Private Ltd.

    Google Inc. does not have any branch offices in India. There is a difference between a branch and a subsidiary.
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