In my previous article, I explained the computation of income tax on earnings from blogging and in this article; I would try to explain the levy & computation of service tax on bloggers and freelancers.
- Recommended Read: Income Tax on earnings from Blogging & Freelance Income
Service Tax on Bloggers & Freelancers
Service Tax is a tax which is paid by the provider of service. Any person whose revenue from providing of any type service during the year is more than Rs. 10 Lakh is liable to pay service tax as per the tax rates prescribed by the govt. The current service tax rate is 12.36% and the govt keeps changing this rate in the budget announced every year. Service Tax is liable to be paid on any service rendered by any person in India if the revenue of the person providing the service is more than Rs. 10 Lakh p.a. This service tax is also levied on bloggers and freelancers as they also provide a form of Service.
However, the Finance Minister gave a major relief when he announced that from 1st July 2012 onwards, service tax would not be levied on sale of any advertising space. This exemption is available for advertisements given in the print media (like newspapers, magazines etc) and for advertisements given in online media (blogs, websites etc). Before 1st July 2012, service tax on sale of advertising space was payable but now sale of advertising space (incl. Google AdSense) has been specifically exempted from levy of Service Tax.
You are requested to note that only sale of advertising space has been exempted from the levy of service tax. Service tax would continue to be levied on revenue earned from providing any other form of service like blog consultancy, blog designing, SEO service, content services etc.
However, service tax would only be liable to be levied when the net revenue earned from these Services (excl advertising sales exceeds Rs. 10 Lakh). Individuals whose total revenue is less than Rs. 10 Lakhs (from all sources other than ad sales) have been exempted from the levy of service tax.
This Exemption for people earning total revenue of less than Rs. 10,00,000 is also known as Small Scale Exemption.
The following examples have been prepared to help you understand whether you are liable to pay Service Tax or not:-
|Particulars (in Rs.)||Example 1||Example 2||Example 3|
|Total Revenue (incl Ad Sales)||8,00,000||15,00,000||20,00,000|
|(Less) Revenue from Ad Sales||2,00,000||8,00,000||5,00,000|
|(Net Revenue is less than Rs. 10,00,000)||(Net Revenue is less than Rs. 10,00,000)||(Net Revenue is more than Rs. 10,00,000)|
Service Tax Rate
Service Tax is levied @ 12.36% on revenue whereas income tax which is levied on the total income. The difference between revenue and Income is explained with the help of the following equation:-
Revenue – Expenses = Income
So, if the total revenue (excl ad sales) during the year is more than Rs. 10 Lakh, you would be required to pay service tax to the govt.
In the above 3 examples, service tax is only applicable in Example 3. Therefore, service tax payable in Example 3 would be Rs. 185400 (i.e. 12.36% of Rs. 15,00,000)
Charging of Service Tax to the Client
Although service tax is payable by the person who is providing the service he can still charge it from your client. This can be explained with the help of the following example.
For eg: Mr. A provides some service to Mr. B for Rs. 50 Lakhs on which Service Tax is levied @ 12.26%. Now in this case, service tax of Rs. 6,18,000 is payable by Mr. A to the govt. However, Mr. A can charge this service tax amount of Rs. 6,18,000 from Mr. B and then deposit this with the govt. Practically, Mr. B also won’t mind paying this extra Rs. 6,18,000 extra as he knows that this amount is not going into the pockets of Mr. A, and Mr. A would be depositing this amount with the govt.
This is how the whole service tax industry works wherein the person who is providing the services, charges the service tax amount from the person receiving the service. You may have also noticed in restaurants and at many places it is written – “Service Taxes extra”.
Service Tax extra basically means that the person receiving the service has to himself pay the service tax over and above the rates mentioned.
In case, you don’t charge Service Tax from your client, you would be required to pay this service tax amount from your own pocket. However, if your total net revenue during the year is less than Rs. 10 Lakhs, you won’t be required to pay this service tax at all.
Service Tax Registration, Payment and Return Filing
Just like PAN No. is issued to each individual for filing his Income Tax Return, similarly Service Tax No. is also issued to every person liable to pay Service Tax. Registration for service tax is a simple process and application for service tax can also be made online through the automated website of the Central Excise and Sales Tax Department.
Different due dates have been prescribed by the Govt for the payment of service tax depending on the kind of registration (Individual/ Company).
Service Tax Return which is a statement of the revenue earned from different type of Services is also required to be filed on a half yearly basis every year in the month of October and April.
However, you are only required to apply for service tax registration and file service tax return only when your total net revenue during the year exceed Rs. 9 Lakhs (excl ad sales). So, the important thing to remember here is that Service Tax is liable to be paid only when the revenue (excl ad sales) exceeds Rs. 10 Lakhs p.a. but is required to apply for service tax registration when the revenue exceeds Rs. 9 Lakhs p.a.
If you still have any question regarding Service tax for your blogging or freelance activities in India, feel free to ask my via comments. If you find this article informative, do share it on Facebook and Google plus.
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