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    Service Tax Guide for Indian Bloggers and Freelancers

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    Service Tax Guide for Indian Bloggers and Freelancers

    Service tax Google AdSense 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.

    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 6,00,000 7,00,000 15,00,000
    Service Tax Applicable
    NO NO YES
    (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.

    Editors note: This is a guest post by Karan Batra from Chartered Club. If you would like to submit an original article at ShoutMeLoud, check our guidelines for submission.

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    { 12 comments… read them below or add one }

    praveen

    Dear sir,
    I have one doubt if i paid service tax through my bill, ex hotel bill, mobile bill etc can i adjust in my service tax return amt

    Reply

    vijay

    If freelancers earn the income in USD and the amount exceeds 10lakh ( in inr terms), do they need to pay service tax? i have heard they dont need to, but what if at the end of the year they convert the USD to inr, then they need to pay the service tax?

    Reply

    Preethi

    Hello sir,
    I am starting up a online shopping business (small scale) , i am planning to sell clothing. by reading your above article, i understood for small scale we done need to pay service tax. is this right what i understood, and third party payment gateway will tax service tax of 12.5% and 2% per transaction. is it right ? or do i need to pay tax to government even if i sell very less products with less profit?

    Reply

    Chitra

    Hi Mr. Karan
    thanks for this helpful info
    My question is – If I am billing a client Rs.40,000 as a freelance content writer, then should I add a service tax component to this amount over and above the 40k? My income from freelance content writing is below 10 lakh annually. Should the client deduct TDS from my 40K? How can I ensure I get the full 40k?

    Reply

    Avtar Singh

    Thanks for this useful information.

    My only doubt is:

    If I am paying media spent to google or facebook though my credit card on the behalf of my client. and I am raising an invoice to my client with that media spent with my management fee. Will then service tax will be applicable on total amount (meida spent+management fee) or only on management fee?

    Thanks
    Avtar

    Reply

    Vijeet Deliwala

    There is a term called “Non-Taxable Territory” and I have read somewhere that US falls under that……….So,according to that any income earned from US will be exempted from this Service Tax………Can you share your valuable opinion in this direction?

    Reply

    Vicky

    Dear mr karan,

    I am a freelancer and provide software development service to foreign clients. Am i suppose to pay service tax or income tax.

    Please help me with this.

    Regards
    Vicky

    Reply

    Arun

    Sir / Madam
    Am I required to register for Service Tax No to pay 12.36%, if I am an individual freelancer and earning more than 10 lacs (salary + frelancing) ? or my PAN is enough ?
    Is Service Tax to be paid over and above Income Tax that I am obliged to ?
    Do I need to file return for service tax too ?
    What if next year I do not have any work, in which case I am required to file service tax return or do some other formality?
    Would appreciate help. Thanks Arun

    Reply

    karan.batra

    Dear Arun

    Only the business income is considered while computing the Service Tax Limit.
    Therefore your Salary income wont be considered in the computation of Service Tax Limit and only your freelance income would be considered..

    If it is more than 10 Lakhs, you would have to apply for a separate service tax registration over and file your returns twice every year…

    Reply

    Rajeesh Nair

    Great information Karan. Thanks for this..
    I read the whole article and found it very helpful but still I have one doubt as its nowhere mentioned in this article.
    What about Affiliate Income (i.e. commissions) generated by Affiliate sale? Do they fall into Service Tax radar?
    Do give your inputs about this..

    Reply

    Karan Batra

    Dear Rajeesh

    Thanks for the feedback… All incomes except Advertising incomes are liable to Service Tax… So Affiliate income automatically falls under the radar of other incomes…

    Reply

    Nizam Khan

    Awesome and much useful information. Nice and detailed resource on service tax in India. So, for bloggers/freelancers, one is liable to pay service tax only when the revenue (exclusive ad sales) exceeds rupees 10 lakhs per year. Thanks for sharing this excellent info and tweeted :)

    Reply

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