GST & TDS ON PAYMENTS RELATED TO ADWORDS
- It is provided that the payment in respect of Google AdWords advertisement, shall attract GST @ 18%, while TDS be deducted @ 2%.
- In India, where any person, wishes to publishes their advertisement through digital platforms, they generally tend to look towards Google and Facebook. Thus, where the invoices are generated by Google India and Facebook India. The same is subject to deduction of TDS under section 194C of the Income Tax Act, 1961.
- It is also clarified, that since some publishers advertise their content using the Google entity registered in India, as well as those registered outside India, the application of 18% GST and deduction of 2% TDS, will be there in both the cases irrespective of the location of the entity/supplier.
- Moreover, publisher advertising through Google entity registered outside India, are also liable to payment of equalisation levy @ 6%. However, the same is not applicable in case of services taken from the Google entity registered in India.
- Also, in case of TDS, where the payment is made to Google India or Facebook India for online advertisements the amount of TDS applicable is initially deposited with the government, out of the deductors pocket, and after depositing the amount of TDS, the deductor is required claim the credit or reimbursement of the said amount from the company.
- The deductor and Google India or Facebook India, comes into a contract, for publishing the advertisements on digital media and making of payment afterwards.
- Since there is a contrct between the two parties, TDS be deducted under Section 194C of the Income-tax Act.
WORKING OF TDS DEDUCTION
Where any person wishes to provide his advertisements on digital media, he can publish the same, by creating an account with Google AdWords. After registering on the portal, the applicant would be required to selct the best option, out of the various options provided regarding the advertisement, its payment plan, and the mode of payment. Google AdWords generally provides for auto-debit payments using debit cards or credit cards.
On the due date of every billing period, Google issues an invoice and deduct the total billed amount from the selected payment mode. Once the payment is successfully dedcuted, the invoice is mailed to the respective customer.
Hence, the deductor is not able to deduct the TDS at the time of making payment to Google India. The amount of payment shall be computed after deducting the amount of TDS but they deduct the gross amount of the invoice.
In such a scenario, the advertisers/deductor is required to deposit the applicable amount of TDS with the government, out of their own pocket. Thus, they are making extra payment, since gross amount has already been deducted by Google and noy thay have to pay TDS amount to Gvernment as well.
Interestingly, Google and Facebook encourage this system, sine using a smart way, they are indulging the deductors to pay the income tax on behalf of the deductee.
GST ON ADVERTISEMENT
Where advertisement services are taken from Google entity registered under GST in India, the same is liable to GST @ 18% and a GST invoice is also required to be issued by Google. The advertiser is required to provide their GST No. to Google, to claim the Input Tax Credit in respect of payment made to Google.
The publishers can supply the information relating to GSTIN to Google, by visitng their “Billing & Payments” section and adding their GSTIN there.
ADVERTISEMENT SERVICE BY GOOGLE ENTITY OUTSIDE INDIA
In case, the advertisers take the services of Google AdWords registered outside India, the same shall also be liable to pay GST @ 18%. However, the amount of GST 18% would be required to be deposited by the advertiser only. Thus, in such a case, GST will be paid under Reverse Charge Mechanism.
COMPUTATION OF NET PAYMENT
As discussed above, payments in respect of advertisement service, availed from Google and Facebook, are liable to GST and TDS. However, the calculation under such payment is of utmost importance. Since GST is levied, the same is added to the invoice amount, TDS is required to be deducted, the same is subtracted from the invoice amount.
Suppose a person undertakes advertisement services fromGoogle AdWords and the monthly invoice amount is of Rs. 2,00,000. Thus, the net payment would be -
Google Ad Invoice Amount
GST @ 18% (18% of Rs. 2 Lakhs)
TDS @ 2% (2% of Rs. 2 Lakhs)
DEPOSIT OF TDS WITH GOVT
- The amount of TDS deducted under Section 194C is required to be deposited with the govt by the publisher. Where such an amount is deposited, the advertiser is required to mention the PAN No. and Address of the deductee, which is Google AdWords. The details are as follows –
Google India Pvt Ltd
No. 3, RMZ Infinity, Tower E
- Once TDS is deposited and the return for the same is filed, a TDS Certificate in Form 16A will be generated and the same is required to be supplied to Google, in order to claim the amount of TDS paid.
- The Google entity will mail the invoice to the publisher.
PROCESS OF REIMBURSEMENT OF TDS PAID
As discussed above, the deductor is making the payment out of their own pocket, while the same is required to be paid by Google. Thus, the said amount of TDS is reimbursed by Google or Facebook to the advertiser.
- The policy of Google is that, once the payment of TDS is made by the deductor, they need to file a valid claim for refund of the TDS amount and the same will be refunded in the form of credit to be used to set off against the succeeding invoice amount.
- For getting the refund, the advertiser is required to furnish the TDS certificates that are signed either digitally or manually signed scanned pdf, on their email or by post.
PROVISIONS RELATED TO TDS CERTIFICATES
- Such a certificate is applicable to all the editions of Google Workspace and other paid subscriptions provided by Google Admin console.
- TDS certificates are required to be provided for every quarter.
- The Certificates be issued, for the quarters ending in June, September, December, and March, latest by 30th July, 30th October, 31st January, and 15th May, respectively.
- The TDS certificates in respect of the previous financial year will not be accepted, provided the same is furnished after 30th April of the current financial year.
- Where the monthly invoicing is activated on a Google Account, the person can send the digital copy of the TDS certificate, directly to the e-mail id firstname.lastname@example.org.
- In case, the account used manual payments, the TDS certificate may be electronically signed, or the manually signed scanned PDF be uploaded.
- The person can also post the hard copy of TDS certificate, along with a covering letter containing the 10–digit Customer ID, and the same be posted to -
Google India Pvt Ltd.
9th Floor, Building 8, Tower C
DLF Cyber City, DLF Phase 2
- Once the documents are received by the concerned department, the same is communicated by email.
- After considering the TDS certificates, Google provides an e-mail, containing the details of credit available.
REIMBURSEMENT OF TDS FROM FACEBOOK INDIA
- The payment structure of Facebook India, as same as that of Google. They deduct the gross amount of invoice using the auto-debit payment mode, and the deductor is liable to pay TDS out of their own pocket.
- In case of Facebook as well, the publisher is required to submit/upload the TDS certificate, duly signed either digitally or manually and then upload the scanned copy in pdf format.
- Once the TDS certificates are verified and validated by Facebook, the refund in respect of amount of TDS is processed, and the same is communicated to the advertiser through an e-mail.
- Such a refund will not be in the form of cash or credit in bank account, it will be a refund in the form of Facebook ad credit and will automatically be set off against the future payments.
- Facebook generally take two months to validate and process the amount of TDS refund.
- In case of Facebook, TDS certificates are required to be uploaded latest by the 31st October of the next financial year.
- In case anu excess deposit is made or claimed, the same shall cause delay or even cancellation of refund.
- Also, in order to claim the refund of TDS and also ITC in respect of GST paid, the publisher is required to update their PAN and GSTIN with Facebook.
- During the Financial Year 2016-17, Government of India, introduced a new concept of equalisation levy where, a certain additional amount of tax be levied in respect of advertisement services taken from an entity registered outside India, while the same is published in India.
- Thus, such services are leviable to equalisation levy @ 6% and the same is applied only where advertisement expenses incurred outside India.
- The most common examples for equalisation levy are –
- Facebook Ads
- LinkedIn Ads
- Twitter Ads
- Google Ads from Google entity registered outside India.S
- Motive behind introduction of equalisation levy is to facilitate registration of foreign publishers in India.
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