GST on Adsense Income

So many people have confusion whether Adsense income is coming under GST radar or not. Whether GST registration is compulsory for people earning income via adsense or not. If you are also confused then here is the post just for you...

In the era of digitized information, online advertising has grown leaps and bounds over the decade. In this regard,Google has introduced revolutionary technology called ‘Google AdSense’. The said technology can be broadly classified in two types. One is ‘AdSense for Search’, where the said technology is designed to enable website publishers who want to display targeted text, video or image advertisements on their website pages and earn money when site visitors view or click the ads. The other type is ‘AdSense for Content’ where ads are placed on content shared in Google online platforms like Blogger and You Tube and Google share a portion of revenue with the owners of the content. In this article, the GST implications on AdSense revenue shared by Google to website publishers or the content owners as the case may be are discussed.

Does Revenue getting from Adsense is it Supply?

Before, we analyse the tax implications, let’s understand the manner in which online advertising is undertaken through this AdSense technology. In the transactions relating to online advertising through AdSense, there are three players involved.

• One is the customer who wants to place their ads in various websites. 
• The second player is Google who would be approached by customer to place their ads. 
• The third player is the web publishers (website owners) who publish information in their websites which will be accessed by netizens. 

In case of Google Online Platforms like Blogger and YouTube, the content owners who maintain blogs or upload videos as the case may be will replace the role of website publishers. Google places ads on the websites or their online platforms in order to reach the netizens. The customers who desires to place ads in websites pays money to Google and a portion of same is shared to website owners.

With this understanding of the business model, let us proceed to understand the GST implications. The placing of ads by Google for customers amounts to supply of the nature of sale of space for online advertising. GST is applicable on this transaction. The next important question for consideration is whether the website publishers or content owners are said to have supplied any service to Google in order to attract GST

The word ‘Supply’ as defined under Section 7 of CGST Act, 2017

(1) For the purposes of this Act, the expression “supply”
includes––

• all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration 1/4 by a person in the course or furtherance of business;
• import of services for a consideration whether or not in the course or furtherance of business;
• the activities specified in Schedule I, made or agreed to be made without a consideration; and
• the activities to be treated as supply of goods or supply of services as referred to in Schedule  II. 

 In view of the above definition of ‘Supply’, the term ‘supply’ is defined in an inclusive manner which includes all kinds of supply of goods or services undertaken for a consideration by a person in the course or furtherance of business.Therefore, any activity undertaken for consideration in the course or furtherance of business would become supply.In this context, let us understand that whether the website publishers or content owners are carrying out any activity in order to conclude that there is a supply of service by them to Google.In short, the service undertaken by website publishers or the content owners would be covered under the residuary category i.e. services not elsewhere specified and subject to GST at 18%.

Whether Adsense Income can treat as Export?

Google accepts the terms and conditions with the website publishers and content owners globally with any one of the following entities as contracting party depending on the location of the website publishers or content owners;

• Google Inc.
• Google Ireland
• Google Advertising (Shanghai) Company Limited
• Google Asia Pacific Pte. Ltd

With respect to website publishers or content owners situated in India, the contract party of Google is Google Asia Pacific Pte. Ltd which is located in Singapore. Thus the recipient of service in case of AdSense Revenue is situated outside India and the services are cross border. In such case,the governing Legislation to determine the tax implications is Integrated Goods and Services Tax Act, 2017.Section 5 of the IGST Act, 2017 provides for levy of IGST which provides that IGST shall be levied on all inter-state supplies of goods or services.

In view of the above provision, a supply of goods or service will become inter-state supply if the supplier is located in India and place of supply is outside India. In the instant case, website publishers or content owners are located in India. Therefore, the service involved can be considered as an inter-state transaction only when the place of supply of the said service is said to be outside India.

In short, a service is said to be exported if the supplier of service is located in India and recipient is located outside India and payment has been received in convertible foreign exchange. In the instant case, the recipient of service Google Asia Pacific Pte Ltd, is located in Singapore and therefore, the service qualifies as an export of service. Accordingly, the supply of services by website publishers or the content owners will be considered as zero-rated supplies and no GST is required to be paid.

Conclusion:

In view of the foregoing discussions, AdSense revenue shared by Google to website publishers or content owners will be a supply of service that attracts GST at the rate 18%. However, as the contracting party of Google i.e. Google Asia Pacific Pte Ltd is located in Singapore and the website publishers or content owners are located in India are paid in convertible foreign exchange, the services qualifies as an export and are zero-rated supplies. Thus in the opinion of the paper writers, no GST is required to be paid on share of AdSense revenue by Google.

Thank you friends next time we will meet in next post……….Bye….

Thanks & Regards,

S. Praveen Kumar Reddy.

–All the above contents only for Public reference and not for any other purpose. Therefore, I can’t take any responsibility for the results or consequences of any attempt to use or adopt any of the information presented on this blog—

(Source: Taxguru)