Who exactly is responsible for paying Service Tax in Online advertising?

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  1. AnandK

    AnandK New Member

    Hello,

    I read your post http://www.charteredclub.com/service-tax-on-digital-advertising/

    The post says: This Service Tax is to be collected, by the service provider, from the Company whose product has been advertised and is required to be paid with the Govt.

    Now in our case, Company A pays Google to advertise their products and Google pays us Bloggers, as it uses our Inventory/Space.

    So in this case:
    Company A's products are being advertised.
    Google is providing the service
    Bloggers are online property owners.

    So Google is required to collect Service Tax from Company A and deposit it with the Government.

    Is my understanding correct?
     
  2. Karan Batra

    Karan Batra Well-Known Member

    Dear Sir

    As per the facts mentioned by you... You have sold Ad Space to Google and you dont know who the advertiser turns out to be... Your agreement is with Google and not with the Advertiser...

    So you have basically sold your Ad space to Google...

    Therefore, you become the Service Provider and Google becomes the Service Recipient.

    So you would be required to collect Service Tax from Google and deposit the same with the Govt.
     
  3. AnandK

    AnandK New Member

    Thanks for replying Karan.

    OK, so we collect ST from Google. And Google too will collect Service Tax from the Company.

    Two scenarios:

    1] If Google gives us ST, then we pay the amount - and we would be eligible to get CENVAT Credit, since its the same service we are talking about.

    2] If Google says No, and says that this amount is all-inclusive, then we will have to pay ST out of our own pocket.

    Am I correct?
     
  4. Karan Batra

    Karan Batra Well-Known Member

    Yes Sir

    Your interpretation in both the scenarios is 100% Correct.
     
  5. AnandK

    AnandK New Member

    Thanks for clearing up my doubts. Tough times ahead! :D
     
  6. Nitesh.Kumar

    Nitesh.Kumar New Member

    Hi Karan,

    Since the contractual entity for Indian adsense publishers is Google Inc., USA and not Google India, and the payments made by Google Inc. are made in convertible foreign exchange (USD), service tax on adsense income need not be paid since it fulfils all the requirements for meeting "Export of Services" criteria as laid out by the Government. I got this clarified from my CA and also took a second opinion from a couple of other CA's specializing in indirect taxation.

    Please share your thoughts on this.

    Warm Regards,
    Nitesh
     
  7. Nitesh.Kumar

    Nitesh.Kumar New Member

    Hi Karan,

    Since the contractual entity for Indian adsense publishers is Google Inc., USA and not Google India, and the payments made by Google Inc. are made in convertible foreign exchange (USD), service tax on adsense income need not be paid since it fulfils all the requirements for meeting "Export of Services" criteria as laid out by the Government. I got this clarified from my CA and also took a second opinion from a couple of other CA's specializing in indirect taxation.

    Please share your thoughts on this.

    Warm Regards,
    Nitesh
     
  8. Karan Batra

    Karan Batra Well-Known Member

    Google is only an agent. We are basically providing services to advertisers who may be based in India or abroad.

    Apart from the location of the entity there are a couple of other conditions as well which are required to be satisfied.

    Please explain the whole adsense model to the CA's from whom you asked for advice. On understanding the whole matter - their opinion may differ.

    PS: All the big adsense publishers are already paying Service Tax.
     
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