Service Tax Guide for Indian Bloggers and Freelancers

Service Tax Guide For Indian Bloggers
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% (Will be 14% from coming year), 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.

Conclusion:

  • AdSense users need to pay service tax on their earning from 1st October 2014.
  • Service tax is not required for income from affiliate sales as it falls under the category of brokerage income.

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.

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Article By
Karan Batra is a CA and blogs about Tax related matters on Chartered Club. He is also a Visiting Faculty Member at the Institute of Chartered Accountants of India

COMMENTs ( 54 )

  1. vignesh says

    Hi, i have a big doubt, if my business of sales is less than 10Lakhs, can i do nil filling and submit all expense bills to claim the service tax that i paid? i.e we pay landine bill, bank charges service tax for fees on DD, some purchases on office needs, etc. basically we do service based on computer service. can you please suggest me the option

  2. Nick says

    Hello,

    I have a website in which we promote properties on our website in Europe and USA and charge customers for our services and our all transactions done in US Dollars and we based in India and we got the payment in our indian account in INR only so do I need to register the company under service Tax or if we do not make 10 Lakhs a year do we need to pay service tax on every transaction or not please reply as soon as you can

  3. GOPI says

    Hi,
    I am working on a contract with a company outside India and it pays me in $/hr basis.

    1.Am I considered as freelancer..?

    2.As my work is paid off in $s on the hourly basis,I cannot climb my client to pay Service tax .Why is that I need to pay Service tax..?

    3.Should I pay Professional Tax..?

    4.If I am falling under 30% slab of Income tax,this 12.something% of service tax need to be paid extra along with Income tax..?Does it mean I need to pay 42.5% of my income as tax..?Kindly help me understand this better.

  4. says

    Hi Karan,

    I am receiving most of my US payments through Paypal. All these transactions are between $150 to $1000. If I receive money through Paypal to my bank account, Is this liable for service tax?

  5. Mani says

    Hi,
    I do Affiliate Marketing. As you said affiliate marketing does not need to pay service tax. At present I receive the payment in my personal savings account.
    Can I continue with my savings account or Do I need to start as a business, Can I register my business as affiliate marketing so that in future I can avoid service tax fully.
    Please clarify

  6. Pradeep Debnath says

    I just to know about service tax for the following two options:-

    1. If I provide physical services in abroad to a foreign client & raise invoice for that. In such case service tax will be applicable or not? Ofcouse we will raise invoice from India & will get the money into India.

    2. If I provide service from India to a foreign customer & raise my invoice for that. In such case service tax will be applicable or not?

  7. Damini says

    Thanks Karan for sharing this info. I have just started working as a freelancer, and have got one payment due (less than 10 lacs). Should I charge them any service tax? Am not liable to pay today, but may be required to pay tomorrow if my income during the year exceeds 10 lacs .

  8. Vikas says

    Hi Karan,

    I spend money on advertising to get traffic & earn Affiliate income through my overseas clients.

    My Q is whenever banks ask the remittance purpose – what should be the clear answer ?
    Example Answer : I am Freelancer in Online Marketing & the inward remittance incurred is the online affiliate commission which I charge to my client under the nature of “Exports of Services”.

    Should I add by saying it is Online Business or would it be under profession ? Please sum up the answer ? Thanks. There is so much confusion as whether it can be considered a business or profession. My receipts are more then Rs 25 lakhs , so if it’s a profession an audit is required ? If it’s business then receipts should be >Rs 1 Crore or Rs 40 Lakhs (m not sure) ?

    Please can you respond asap ? Thanks.

  9. nishant says

    Hey, I earn some 3.5 lacks salary in an organisation and had earned some 1.5 lacks from adsense last year.
    Now, this adsense account is a business account where the monthly earning is directly credited to my proprietary firm’s bank account.

    Now do I need to just add both the incomes and calculate the income tax on it, or for adsense amount its something done differently? Do I need to file two separate returns?

  10. says

    Sir
    My all income, revenue Is from Adsense and it’s somewhat four lakh rupees, please tell me
    1. Do I need to apply service tax number and fill nil service tax
    2. Do I have to give income tax?
    3. Do I need to have current bank account or saving Is OK?
    Thanks

  11. s.bhaskar says

    Dear Sir,
    Iam a memory trainer ,keep moving from one town to other town organising paid workshop on memory, i would like to know does this attracts service tax, if any how much.

  12. Husain says

    I have charged service tax to my client already and i did not pay my service tax Yet, Can my client check, I did not pay service tax yet?

  13. Gurpinder says

    When we give any service to customer then we have collect the service tax from the customer if income is more than 10 lakh and its our responsibility to pay that service tax to the govt..

    But when we are placing google adsense ads on our website then we are not directly dealing with customer and we don’t even know who is the customer and we can’t even collect service tax from them however it is google adsense who is directly dealing with them so it should be their responsibility to collect the tax and pay to govt.

    If we also pay service tax again on the income then it will be a kind of double service tax on same amount once by google and second time by us.

  14. Malcome Figer says

    If I provided Recruitment Service to client who located out side India but Service Provided into India or branch in India than Service Tax is Applicable or not???

  15. raju says

    Sir,
    I am working with an organisation and handling their website, they are paying monthly for that. now i register a proprietorship they are demanding bill for monthly payment.
    They are paying Rs. 2000 permonth. can i give them bill without service tax of 12.36% or have to give them Rs. 2000+12.36% .
    pls reply

  16. Samadhan More says

    Hi Karan,

    The article is very informative.If we are hiring a consultant for a period of 1 year and we are paying a consultancy fees of more than a lakh per month. and this would be his first assignment as a consultant.

    are we going to pay the service tax from the first month or after his net income reaches 10 lakhs.

    Kindly reply at the earliest.

    Regards
    Samadhan

  17. Andro+ says

    hi, my total revenue for this financial year will come around 26L. I earned through android apps. Revenue came from 95% from ads, remaining came from Others.

    How much I have to pay as service tax and others.

    I am self employed. I have a family with kids also.. Please help..

    Thanks

  18. Parveen Rana says

    Hello Sir,

    I am working as a offshore developer(programmer) for one of my client in Eng. The client pays me for my services monthly and my gross income from this is around 100000/- Month. Under what type of tax my income falls.

    Please advice.

    Regards

  19. Khushbu says

    I read your article and found it really knowledgeable. I have got one important concern here. I mainly work with non-indian clients via online website odesk.com where there is no provision to ask for services tax from clients. Because Indian Service Tax does not apply for them. So, I am not asking for it, then why would I need to pay it to the government. Please suggest me. Thanks

  20. Vijay says

    Hello Sir,

    I read your article and founf it really knowledgeable. I have got one important concern here. I mainly work with non-indian clients via online website odesk.com where there is no provision to ask for services tax from clients. Because Indian Service Tax does not apply for them. So, I am not asking for it, then why would I need to pay it to the government. Please suggest me.

  21. Srinivas says

    Hi karan
    I work for a company located in USA from India. Amount is paid by freelancer client elance in dollars .when I withdraw this amount to be deposited to my bank account the dollars amount is converted to INR and Paid through western Union bank.I was told by a CA to get service tax registration done . I did the registration. But would like to know if I need to pay service tax or not. What should I do with the registration if I do not need to pay service tax.please help me out on this
    Thanks
    Srinivas

  22. says

    Hi Karan,

    I do quite a bit of work with consultants out of India. I’m curious, because I’m a foreign company located in North America, should I be paying these consultants a service tax for web design? Are we exempt from paying these taxes?

    Hope to hear from you and Happy New Year.

    Thank you,

    Steve

    • says

      Hi Steve,

      Not sure you have received the reply from Karan. However my answer might help you.

      After reading this article, as a website design company owner, I don’t need to add service tax in the invoice (If the receipt in foreign currencies). However, my auditor consultant recommended me to doing so. It will give retrospective advantages to me in the future with the government and with the bank. If you have a long-term relationship and trust with your service provider, check with their intentions and allow them to pay service tax to the government.

      Hope it helps :)

  23. premji says

    Hello,

    Do you need Import Export Code if total revenue per year is less than Rs. 10 Lakhs paid in USD via paypal?

    Thanks.

  24. Mihir says

    Dear Mr.Karan Batra,

    Can you please advice me on my 3 queries on Service Tax –

    1. If I bill Mr. A with Service Tax at 12.36%, component of Rs. 1000/-. If Mr. A pays me the bill but without this Service Tax component of Rs. 1000/-. Do I still have to pay the Service tax on my own ?

    2. If I raise a bill on Mr. A with Gross Amt of Rs 10,000 which is inclusive of Service Tax component of say 900/-. If Mr. A doesnot pay my entire bill of Rs. 10,000/-. Am I liable to pay the Service Tax on this unpaid bill ?

    3. Do we pay Service Tax after we are paid for the bills that have been generated or should we pay based on anticipation that they would be paid ? Eg I have generated bills of Rs. 1,00,000 in the first quarter and I receive payments for Rs.70,000/- within the first quarter. Do I have to pay Service tax after the end of the first quarter for 70,000/- or 1,00,000/- ?

    Looking forward to your valuable inputs..

    Regards // Mihir

  25. ucksocial says

    Thank you Karan for sharing such information.

    Off topic, but please write article or give a quick reply.

    I am Govt. employee and I design web template / WordPress themes and send to themeforest.net (Envato markets from Australia Envato.com) Envato approve it, and sell to customers world wide, collect money, issue bill, invoice and get 50% fee for that. Envato send me the rest money thru Paypal. Envato never tell about who is the customer of my design. ( My total income salary+designer ~6Lac )

    Is it applicable for Service Tax ?
    Is it applicable for VAT ?

  26. K Nayak says

    Hi Karan,
    It was a very informative article. Will you please reply to my following querries..
    I am a freelancing Technical consultant. Recently I received some fees in foreign exchange from a Japanese company for establishing their products n Indian market.
    1)Do I need to pay service tax on this fee?
    2)My total revenue from indian clients is less than Rs 9 Lakhs, but with the above mentioned income, it crosses Rs 10 Lakhs. Do I need to go for S.T. registration?
    Thanks in advance.

  27. Vipul says

    Hi Karan,

    Thanks for the useful information! I have a query though!

    I am starting a business (Corporate Training) from home- Sole Proprietorship, though I will not be a freelancer, but will have trainers working for me on freelance basis (no permanent employees).

    Do I need to register for Service Tax?
    It is known that till the total income does not reach 10 lacs I need not apply for it. This point is clear to me
    But then Do I charge the service Tax from corporates I will be working with?

    If I do register Service Tax before the 10 lacs, are there any implications for me?

    I am a bit confused on this would really appreciate your feedback on this at the earliest! It would be highly appreciated!

    Thanks

  28. Vikas says

    Hi Karan,

    I earn affiliate income from non-Indian clients & do so by running advertisement in Indian Rupees. I don’t charge service tax to clients, so it has to be from my pocket.

    Since 1st October 2014 – I am paying 12.36% service tax in Google Advertising.
    I hope the service tax (12.36%) on Revenue = (Net Revenue – (Advertising cost (expenses) + Service tax on advertising cost)) ?

    If I calculate the Tax formula for my overall profit at a maximum ROI of 100% = profit% comes to be 53% & (Tax + Service Tax)% comes to be 47%

    Advertising expenses (cost) = 10
    Total Revenue = 20
    ROI = 100% (without Tax)

    Service Tax on Cost = 1.3 (avg. = 13% of cost)
    Service Tax on Net Revenue = (Total Revenue – (Advertising + ST on Advertising))*13% = 1.13

    Taxable Income = (Revenue – Advertising Cost – ST on Cost – ST on Net Revenue) = 7.569
    Tax = (taxable income)*30% = 2.27 (assuming – 30% slab)

    Profit after tax =(Total revenue – (advertising cost + ST on cost + ST on Net revenue + Taxable income tax))= 5.3 = 53%

    Tax + ST = 4.7 = 47%

    So According to Indian Tax norms, I have to pay a total of 47% in tax of my profit & that too If I maintain 100% ROI.

    It feels so sad that we are boosting the economy of India since our payments are coming from cross-borders & still we are ending up at a very almost profit % = tax %.

    Karan please correct me I am wrong in above calculations. I am concerned about my Service tax on Revenue whether ( Service Tax would be on total revenue or Service Tax = (Total revenue – expenses)

    Please let me know.

    Thanks.

  29. says

    Hi! This article was really informative as I have been perplexed by the service tax vs. income tax debacle for my freelance income for a while now. I have a question, though. If my freelance income is less than 10 lakhs, I am exempt from paying service tax. Then, would I have to pay income tax on this amount or not?

  30. Nitesh says

    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

  31. Harish says

    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

  32. Arjun says

    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.

  33. says

    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?

  34. Iti Jain says

    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

  35. Mohammad Amir says

    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.

  36. says

    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.

  37. Akshay Naik says

    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?

  38. Zainil says

    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 ! :-)

  39. says

    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.

  40. Sudarshan says

    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.

  41. praveen says

    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

  42. vijay says

    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?

  43. Preethi says

    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?

  44. Chitra says

    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?

  45. Avtar Singh says

    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

  46. Vijeet Deliwala says

    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?

  47. Vicky says

    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

  48. Arun says

    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

    • karan.batra says

      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…

  49. Rajeesh Nair says

    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..

    • Karan Batra says

      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…

  50. Nizam Khan says

    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 :)

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