File Your Income Tax Return Before 31st July 2024.
The digital economy boom and affordable internet prices have empowered people to share their thoughts through videos and posts. Platforms like YouTube facilitate quick information sharing. YouTube generates income from ads and promotions. In this article, we will get to know about the GST on YouTube Ad Revenue & income from YouTube taxable under which head and much more.
Terminology needs to be understood for understanding regarding YouTube revenues.
Five terminologies need to be understood:
- YouTube – the Company that allows posting the videos on digital platforms.
- Youtuber – The person creates the video on the platform and earns income from YouTube after having a specific number of subscribers as per the terms specified by YouTube.
- Blogger – This person is the one who promotes the product/services in collaboration with an advertising agency.
- Services for creating content: Content creation services involve the production of unique content designed for uploading on YouTube. This service can be provided by individuals or organizations.
- Services for sharing content: Content-sharing services, in the context of YouTube, entail the act of sharing pre-existing content. This service can be provided by either individuals or organizations.
Overview of Youtuber and Blogger
YouTube is a subsidiary of Google located in the United States, providing a platform for people to establish channels and distribute their videos. Furthermore, the company earns income by distributing advertisements and different types of promotional material that are showcased alongside the videos available on its platform.
A YouTuber is an individual who manages a YouTube channel. A content creator on YouTube starts making money once their channel reaches a certain number of subscribers and their video views exceed a particular limit, according to YouTube’s guidelines. GST on YouTube income & GST on YouTube Ad Revenue needs to be understood.
However, a blogger is defined as someone who offers a platform for brands to showcase their advertisements. Intermediary organizations facilitate communication and collaborations between bloggers and brands, functioning as advertising platforms. Mostly, bloggers rely on advertising platforms like Google AdSense to generate income when advertisements displayed on their blogs receive clicks. Google AdSense serves as an intermediary, concealing the identities of advertisers from bloggers.
Scope for GST
To attract the GST as per India’s GST regime it should be covered under the definition of Supply. As per CGST Act 2017, Supply includes sales of goods or services for consideration. Hence in this case Youtuber/Blogger provides the services by way of posting the video on YouTube for consideration.
Services provided by Blogger will be covered under Online Information and Data Base Access or Retrieval Services as these services are provided through the medium of internet and received by the recipient online without having any physical interface with the supplier of services. Hence from the above, it can be concluded that the services will be covered under GST Regime and treated as supply.
Registration Requirement under GST
The Youtuber and Blogger will be required to be registered under GST in case where total turnover is more than 20 Lakhs in a financial year. However, this limit will be considered as 10 lakhs in the case of special category states. However, in cases where the person providing the service is different from the registered state of the recipient in that case registration will be required irrespective of total turnover. The person can opt into the composition scheme if the total turnover is up to 50 lakhs and other conditions as specified are met.
Export of Services of Youtuber and Blogger
Export of services is also considered as supply under GST where the Supplier of services is in India and Recipient is located outside of Taxable territory i. e Outside India. Hence if the place of supply is outside India it will be treated as Export of Services.
Blogger is providing the OIDAR services i.e., the definition includes advertising on the Internet and as per place of supply it will be the recipient location, hence from the above it will be treated as an export of services.
Hence from the above, it can be concluded that services provided by Youtuber, and Blogger will be treated as zero-rated supplies. Youtubers can pay the tax on the services provided and later can claim a refund for the same or can provide the supplies covered under the Letter of Undertaking without paying any taxes.
GST Rates
The services offered by YouTubers and bloggers are liable to a Goods and Services Tax (GST) of 18%, which can be further explained as a 9% Central GST (CGST) and a 9% State GST (SGST), or simply an Integrated GST (IGST) of 18%.
This rate is only valid if the YouTuber meets the requirement of being liable for GST registration or already being registered for GST. Whenever services provided by YouTubers or bloggers are considered as zero-rated supplies, it is classified as zero-rated supplies and no GST is applied.
Use of the YouTube Platform by YouTubers
In this scenario, content creators on YouTube can make use of the platform to upload their videos and distribute their content. YouTube is acting as a service provider, while the Content Creator is functioning as a service recipient in this scenario.
Now, it is necessary to analyze the location of supply, which is regulated by section 13 of the IGST Act, 2017. According to section 13(12) of the IGST Act, 2017, the location of supply for online information and database access or retrieval services (OIDAR) will be determined based on the recipient’s location. Sec. covers the definition of OIDAR services. Section 2(17) of the IGST Act, 2017 pertains to the service offered by YouTube to the Content Creator as mentioned above. We can sum up this transaction as follows:
- The service provider’s location YouTube has been outside in India.
- The person creating the content is in India which is a service recipient.
- The location of the Content Creator is in India which is a place of supply of service. To further explain, the Import of Service is defined in Section 2(11) of the IGST Act, 2017 as the provision of any service, wherein:
The service provider is situated outside of India, specifically in the case of YouTube. The service recipient is situated in India, specifically the Content Creator in this instance.
Since the service is provided in India, the location of the content creator, we can assume that this transaction constitutes an import of service. As a result, the tax on YouTube income in India is the Reverse Charge Mechanism (RCM) is applicable as specified in Section. Section 5(3) as stated in the IGST Act of 2017. So, YouTube’s income tax calculation needs to be done.
Thus, the Content Creator, who is the Service Recipient in this scenario, will be responsible for settling the Goods and Services Tax (GST) obligation through the Reverse Charge Mechanism (RCM). Nevertheless, as YouTube does not require any payment from Content Creators for utilizing its platform and uploading videos, there will be no GST responsibility for them in this scenario.
<h2id=”ad” >Ad Income earned by YouTuber.
In this scenario, YouTube plays ads during videos uploaded by content creators (YouTubers) and receives revenue from these ads. YouTube shares a portion of this revenue with content creators. In this case, the content creator acts as the service provider and YouTube acts as the service recipient.
At this point, it is necessary to revisit Section 13 of the IGST Act, 2017 and the place of supply prescribed under Section 13 of the IGST Act, 2017. 13(12) of the IGST Act 2017, Place for Providing Online Information and Accessing or Searching Databases “OIDAR”. The location of the service recipient applies to the location of the supply of the service. The definition of OIDAR services is described in Section 2(17) Under the IGST Act 2017; This transaction can be summarized as follows:
- Location of Service Provider i.e., Content creators residing in India.
- Location of Service Recipients, i.e., YouTube is located outside India.
- The location of the Service, i.e., YouTube, is located outside India.
- Now, coming back to the definition of export of services as defined in Section 2(6) of the IGST Act, 2017, it is stated that “export of services” means the supply of services where:
- The service provider is based in India. (In this case the content creator)
- The beneficiary is located outside India. (In this case, it is YouTube)
- The place of supply location is outside India. (In this case the YouTube location)
- Payment for this service is received by the service provider in a convertible currency. (Content creator receives payment in foreign exchange)
In conclusion GST on YouTube Ad Revenue is not applicable as the above transactions fall within the scope of export of services and fall under zero-rated supplies under Section 16 of his IGST Act, 2017. The content creator must submit a letter of understanding (LUT) to the relevant GST officer and satisfy other relevant conditions to avoid having to pay GST. Content Creator is entitled to a refund of her GST paid on input and purchase of input services used in the provision of such services under Section 16(3) of the IGST Act, 2017.
YouTube revenue from advertising companies
In this scenario, YouTube provides a platform for advertising companies to play ads during videos uploaded by content creators (YouTubers). In this case, YouTube acts as a service provider and the advertising company acts as a service recipient. Based on the discussion in Case 1, it can be easily concluded that the above transaction falls within the scope of import of services and the Reverse Charge Mechanism (RCM) under Section 1 is applicable. Therefore, the recipient of the service (in this case the advertising company) must resolve her GST liability by RCM.
Premium subscription provided by YouTube
In this case, YouTube offers a premium subscription to the person who can watch videos without ads by making a certain payment on YouTube. In this case, YouTube acts as a service provider and a natural person acts as a service recipient. Now, as per the discussion in Case 1, we can easily conclude that the above transaction falls within the scope of import of services and Reverse Charge Mechanism (RCM) is applicable under Sec. 5(3) of the IGST Act, 2017. Accordingly, the individual recipient of the service in this case will have to pay the GST payable under RCM. However, there is a difference in this case as the individual is a tax-free online recipient. Therefore, YouTube will have to pay GST as per section 14 of the IGST Act, 2017.
Conclusion
In short, the impact of GST on YouTube Ad Revenue for Indian YouTubers and Bloggers is diverse. They must follow GST rules with an 18% tax rate. Exported services are taxed at zero rates, offering flexibility for tax refunds. Specifics vary based on services, invoking the Reverse Charge Mechanism at times. YouTube’s ad revenue from companies is also under this mechanism. Premium subscriptions incur GST, paid by subscribers or YouTube. Comprehending and following GST rules is crucial for accurate and lawful tax handling in this industry. Thus, understanding and compliance with GST regulations are pivotal for individuals in this industry to ensure accurate and lawful tax treatment.
