How does GST Impact the Digital Marketing Sector in India?

Last Updated at: June 15, 2020
5117
How Does GST Impact The Digital Marketing Sector In India
How Does GST Impact The Digital Marketing Sector In India

When Prime Minister Modi’s government introduced the one tax system, there was a huge hue and cry. The digital marketing sector was hit by it like every other industry. The objective of this post is to look at the various ways GST has brought a change in the online marketing industry.

The Goods and Service Tax was brought to the market in India from 1st July 2017 and are an attempt from the incumbent government to bring the nation under one tax system. Economists believe this radical change have long-standing effects on the finance and economy of the country. The GST will be governed by the Goods & Services tax Council along with the Finance Ministry of India and is expected to revamp the system of taxation followed in the country completely. So here’s a look at how these GST reforms impact the digital marketing sector.

As always if you’d like to know more about professional help on startups, registrations or
compliance, browse our services and find our how we do it differently from others.

Increase in the tax rate

As service tax increases from 15% to 18%, digital marketing companies which function under different states and jurisdictions finds it difficult to pay taxes as they have to take into consideration the GST slabs and SGST and IGST rules. They have to counterbalance the 3% increase in rates by hiking their prices and cutting other costs. Gradually, the government believes that the difficulties will pan out, and in the long run, will help strengthen the economy. The GST implementation allowed expenses on advertising to be applicable to avail the input credit of 18%, which helps companies cut their losses and hence, this was a welcome change for the marketing sector.

Reforms in GST

The Arun Jaitley headed the 32nd meeting of the GST council ended by deciding on some new rules for MSMEs which can be regarded as reasonably exciting as it aims to cash in on the growth that the digital marketing industry is undergoing. Almost 45% of such companies employ less than ten people while 33% function with less than 30 employees. Around 78% of such companies make less than Rs. 40 lakhs a year.

A rise in Exemption Limit

The GST exemption limit has been raised from Rs 20 lakh to Rs 40 lakh and thereby will include a lot more companies. Companies which earn less than 40 lakhs INR annually has always mentioned how they hate paying the tax because that leaves too little with them making it harder for them to register a profit and this exemption limit raise will greatly benefit such companies. States can decide between the two slabs, and both Maharashtra and Karnataka which are hubs for commerce have gone with the Rs 40 lakh slab hinting what pattern the other states will choose as well in an attempt to encourage startups.

Make Your Business GST Ready

Composition Scheme

Services sector were not included in the composition scheme earlier, but new reforms have made both the service and mixed supply sectors a part of the programme. Online marketing agencies and content writers can avail the benefits of the composition scheme at a 6% tariff rate if they make less than Rs. 50 lakhs a year. This gives them several competitive advantages such as the option to file IT returns once a year and also pay the tax at a flatter and lower rate. Digital marketing agencies lose their claim on input tax credit if they choose to comply with the composition scheme and will, therefore, pay tax from their profits. Such companies have to register by filling the GST CMP-01 form and also form GSTR-4.

Cess in Kerala

While earlier, companies in Kerala did not have to pay CESS before, they now have to pay a Cess of 1% for up to two years. This change was brought in to help rebuild the state which had been ravaged by floods last year. These reforms will have impacts worth Rs. 3000 crore and will come into effect from 1st April 2019.

MNCs

The Google tax, which is levied on foreign digital MNCs such as Twitter, Yahoo, Google and Facebook will also be affected by the GST and might lead to an increase in operational costs for such  MNCs. The initial 2-3 months witnessed several implementational hiccups, and while big brands and MNCs were prepared, smaller business people and companies found the transition difficult as they did not have the right personnel to manage the shift. Such brands took a while to watch, study and analyse the trend and then made the switch resulting in some losses for such companies. While the service tax rose by 3%, it did not have a decisive impact as the new system allows for expressing the expenditure as an input credit. Advertising spends on companies, and big brands are expected to increase as advertising cost are projected to decrease.

While the previous tax system considered the advertising expense to be a manufacturing cost and hence made it liable to pay VAT and sales tax, the new system allows marketing companies to avail some losses as input credit. Experts believe that this will lead to an increase in the value of money companies spend on advertising and branding and hence, the sector is expected to grow by 10% of and register an increase in investments up to INR 5,000 crore. The increase in the internet penetration rate and initiatives undertaken by the Central Government such as Digital India will significantly help the Digital marketing field, and the growth is expected to be exponential.

Applicable in India from 1st July 2017, overall, GST will cause the expansion of growth of the marketing world. In some cases, it is beneficial like increase in GST exemption limit from Rs 20 lakh to Rs 40 lakh. In other instances, it may appear as a burden such as a rise in the tax rate.

Can the taxpayer add invoices if the supplier did not upload the invoice?

It is easily possible to add invoices. If you have obtained good or services or managing invoices, you can upload invoice.Understand the procedure for GST registration and GST returns here.

I ALREADY HAVE ONE MSME REGISTRATION CERTIFICATE, CAN I APPLY FOR ANOTHER ONE?

If you have two different professions and the companies have different names, then you can apply for the second MSME Registration Certificate.More on Income Tax Return Filing.

What is Revised Return and can I file a Revised Return?

Do not panic when you have submitted the ITR with errors. Revised return option filing is available and it must be done before the due date.Learn more about ISO Certification.

Can I use ISO logo?

If you want to demonstrate ISO certification by using the ISO logo in your business, you need to approach the certification body. More info on NGO Registration in india.

Is and Office or Landline Must for Registering the NGO?

An Office or Landline number is not a must for NGO registration, but is beneficial in case of urgent communications.More about Udyog Aadhar Registration.

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How does GST Impact the Digital Marketing Sector in India?

5117

When Prime Minister Modi’s government introduced the one tax system, there was a huge hue and cry. The digital marketing sector was hit by it like every other industry. The objective of this post is to look at the various ways GST has brought a change in the online marketing industry.

The Goods and Service Tax was brought to the market in India from 1st July 2017 and are an attempt from the incumbent government to bring the nation under one tax system. Economists believe this radical change have long-standing effects on the finance and economy of the country. The GST will be governed by the Goods & Services tax Council along with the Finance Ministry of India and is expected to revamp the system of taxation followed in the country completely. So here’s a look at how these GST reforms impact the digital marketing sector.

As always if you’d like to know more about professional help on startups, registrations or
compliance, browse our services and find our how we do it differently from others.

Increase in the tax rate

As service tax increases from 15% to 18%, digital marketing companies which function under different states and jurisdictions finds it difficult to pay taxes as they have to take into consideration the GST slabs and SGST and IGST rules. They have to counterbalance the 3% increase in rates by hiking their prices and cutting other costs. Gradually, the government believes that the difficulties will pan out, and in the long run, will help strengthen the economy. The GST implementation allowed expenses on advertising to be applicable to avail the input credit of 18%, which helps companies cut their losses and hence, this was a welcome change for the marketing sector.

Reforms in GST

The Arun Jaitley headed the 32nd meeting of the GST council ended by deciding on some new rules for MSMEs which can be regarded as reasonably exciting as it aims to cash in on the growth that the digital marketing industry is undergoing. Almost 45% of such companies employ less than ten people while 33% function with less than 30 employees. Around 78% of such companies make less than Rs. 40 lakhs a year.

A rise in Exemption Limit

The GST exemption limit has been raised from Rs 20 lakh to Rs 40 lakh and thereby will include a lot more companies. Companies which earn less than 40 lakhs INR annually has always mentioned how they hate paying the tax because that leaves too little with them making it harder for them to register a profit and this exemption limit raise will greatly benefit such companies. States can decide between the two slabs, and both Maharashtra and Karnataka which are hubs for commerce have gone with the Rs 40 lakh slab hinting what pattern the other states will choose as well in an attempt to encourage startups.

Make Your Business GST Ready

Composition Scheme

Services sector were not included in the composition scheme earlier, but new reforms have made both the service and mixed supply sectors a part of the programme. Online marketing agencies and content writers can avail the benefits of the composition scheme at a 6% tariff rate if they make less than Rs. 50 lakhs a year. This gives them several competitive advantages such as the option to file IT returns once a year and also pay the tax at a flatter and lower rate. Digital marketing agencies lose their claim on input tax credit if they choose to comply with the composition scheme and will, therefore, pay tax from their profits. Such companies have to register by filling the GST CMP-01 form and also form GSTR-4.

Cess in Kerala

While earlier, companies in Kerala did not have to pay CESS before, they now have to pay a Cess of 1% for up to two years. This change was brought in to help rebuild the state which had been ravaged by floods last year. These reforms will have impacts worth Rs. 3000 crore and will come into effect from 1st April 2019.

MNCs

The Google tax, which is levied on foreign digital MNCs such as Twitter, Yahoo, Google and Facebook will also be affected by the GST and might lead to an increase in operational costs for such  MNCs. The initial 2-3 months witnessed several implementational hiccups, and while big brands and MNCs were prepared, smaller business people and companies found the transition difficult as they did not have the right personnel to manage the shift. Such brands took a while to watch, study and analyse the trend and then made the switch resulting in some losses for such companies. While the service tax rose by 3%, it did not have a decisive impact as the new system allows for expressing the expenditure as an input credit. Advertising spends on companies, and big brands are expected to increase as advertising cost are projected to decrease.

While the previous tax system considered the advertising expense to be a manufacturing cost and hence made it liable to pay VAT and sales tax, the new system allows marketing companies to avail some losses as input credit. Experts believe that this will lead to an increase in the value of money companies spend on advertising and branding and hence, the sector is expected to grow by 10% of and register an increase in investments up to INR 5,000 crore. The increase in the internet penetration rate and initiatives undertaken by the Central Government such as Digital India will significantly help the Digital marketing field, and the growth is expected to be exponential.

Applicable in India from 1st July 2017, overall, GST will cause the expansion of growth of the marketing world. In some cases, it is beneficial like increase in GST exemption limit from Rs 20 lakh to Rs 40 lakh. In other instances, it may appear as a burden such as a rise in the tax rate.

Can the taxpayer add invoices if the supplier did not upload the invoice?

It is easily possible to add invoices. If you have obtained good or services or managing invoices, you can upload invoice.Understand the procedure for GST registration and GST returns here.

I ALREADY HAVE ONE MSME REGISTRATION CERTIFICATE, CAN I APPLY FOR ANOTHER ONE?

If you have two different professions and the companies have different names, then you can apply for the second MSME Registration Certificate.More on Income Tax Return Filing.

What is Revised Return and can I file a Revised Return?

Do not panic when you have submitted the ITR with errors. Revised return option filing is available and it must be done before the due date.Learn more about ISO Certification.

Can I use ISO logo?

If you want to demonstrate ISO certification by using the ISO logo in your business, you need to approach the certification body. More info on NGO Registration in india.

Is and Office or Landline Must for Registering the NGO?

An Office or Landline number is not a must for NGO registration, but is beneficial in case of urgent communications.More about Udyog Aadhar Registration.

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