ShoutMeLoud – Shouters Who Inspire

Superlinks
≡ Menu
≡ Menu

Service Tax Guide for Indian Bloggers and Freelancers – 2014

TA
Service Tax Guide for Indian Bloggers and Freelancers – 2014

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 (whether Consultancy/Affiliate/Designing/ SEO or any other 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.

It is pertinent to note here that Sale of Ad Space on a website is also a part of Service and Service Tax would also be levied on Sale of Ad Units on a Website/ Mobile device. From 1st July 2012 till 30th Sept 2014 – sale of ad space on a website/ mobile was specifically exempted from the levy of Service Tax as this was included in the negative list of services on which service tax is not applicable.

However, Budget 2014 brought in an amendment and now sale of Ad Unit on a Website/ Mobile would attract Service Tax @ 12.36% wef 1st Oct 2014. This Service Tax @ 12.36% would be applicable on all kind of digital ads i.e. Direct Ad Sales, Google Adsense Ads, Ad Sales through Agents etc.

Service Tax Exemption

Service Tax is not levied in the following cases:-

  1. In case the Total Revenue/Turnover of the business is less than Rs. 10 Lakhs. This exemption is known as Small Scale Exemption.

  2. All Services which are exported out of India are also exempted from the levy of Service Tax. The Govt. has specified several rules for determination of whether a service provided is considered as Export or not.

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 the total net revenue during the year exceeds 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 me 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.

  • Author Bio

  • Latest Post

Article by karan.batra

Karan has written 3 articles.

If you like This post, you can follow ShoutMeLoud on Twitter. Subscribe to ShoutMeLoud feed via RSS or EMAIL to receive instant updates.


{ 24 comments… add one }

  • Nitesh

    Hi, If the client that takes the service is located in usa and am making a bill in dollers but the service is provided in India, do we still have to charge the tax?

    Services type: Promotional Film

    Reply
  • Harish

    Hi, If the client that takes the service is located abroad but the service is provided in India, do we still have to charge the tax?

    Services type: Editing
    Pl. advise. TY

    Reply
  • Arjun

    Hello Sir

    If some one from India is doing service based work like transcription, with the employer being in USA, then is it considered as an export of services and hence is it required to take an IE code even for monthly income of 1300 US dollar? If it is export, then what are the departments that we have to contact for the export process. I heard recently we have to report to the STPI for all kind of software and service-related activities or export. Please clarify sir as this seems to be the common cause of all freelancers in India.

    Reply
  • Philip George

    The service tax for online ads began from 1 October 2014. If revenue for the six months from October 2014 to March 2015 is less than Rs 10 lakh, am I liable to pay service tax?

    Reply
  • Iti Jain

    Hi Karan

    Would like to correct you that sale of Ad is not taxable from 1 Oct-14 onwards because as per the CBEC Website & budget , the taxability of the same will be effective once the bill receives the assent of the President

    Reply
  • Mohammad Amir

    Hi,

    Thanks for your article, it helped me lot. I have some query ,please reply me, i have contract with one Company from Foreign. I will receive money in my bank directly i.e. in USD . I heard if i receive money in USD , then i dont hv to pay SERVICE TAX, as service is used Outside India. And i think you also written here “All Services which are exported out of India are also exempted from the levy of Service Tax. The Govt. has specified several rules for determination of whether a service provided is considered as Export or not.”

    Please guide me, if i am right.

    Reply
  • Danish Wadhwa

    thanks for the useful information.
    I am running a small hosting company, and as per my experience there is thing called Reverse Service Tax. If you fall under Service Tax category, you are too liable to pay reverse service tax to Indian Govt.

    It means you are selling any of your service to any client outside India either you charge them service tax or you pay on their behalf to Indian Govt.

    Many bloggers use number of softwares for daily use, ams they but it from foreign vendors this don’t charge Service Tax on it. But you are still liable to pay 12.36% Service tax under Reverse Service Tax section.

    Hopefully i am correct still Karan can guide on this.

    Reply
  • Akshay Naik

    Hey Karan,

    your article is very insightful. I have a question though!
    suppose I start a Social Networking Site and I post Ad’s which happens to be my only source of income. would I still be liable to pay service tax?

    Reply
  • Raj Smith

    Hey Karan,

    Nice ! This was very helpful, covered most in relating to service tax.

    Reply
  • Zainil

    Hi Karan!

    At 1st, great info, thanks ! :-) I have got couple of questions, they being:

    1. Could you please define import & export of service with respect to the blogging industry? If possible, please give some real examples, along with the tax implications for the same.

    2. If my blog is hosted on a server outside India, will my revenue will still be liable for service tax? Will the provisions of place of service be considered here, since my blog is hosted outside India?

    3. Will Google Adsense Income will fall under Import of Service, even when I am receiving the income from Google India?? How do I pay Service Tax on Google Adsense Income, under Normal Charge or under Reverse Charge?

    4. At times, I get paid for giving backlinks, is this also termed as service, as practically I am not dedicating any space to it over my blog?

    5. What different codes of Service Tax need a blogger register for?

    karan, Thanking you in anticipation for the replies ! :-)

    Reply
  • Sumit Singh

    Thanks a lot Karan for this useful information. I was also very confusing about the fact that whether i am liable for any service tax or not. But your article has made me clearly understood it. I appreciate this article and thanks for sharing.

    Reply
  • Sudarshan

    What is the scenario for Adsense publishers after the new rule, how can we collect Service tax from Google. So if this is applicable from October 1, 2014 then the service tax is calculated for the income from that month? Also Google is paying directly in USD to our Bank account and since we are getting FIRC will this help to get Service Tax exemption? Updates on these should help us, Thank you.

    Reply
  • 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

Leave a Comment