GST implications on YouTuber Revenue

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GST implications on YouTuber Revenue
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• Introduction
• Over the last three years, YouTube has paid its
  creators more than 50 billion dollars through
  the YouTube Partner Program. No doubt, the tax
  implication of such amount cannot be ignored.
  YouTube pays creators several ways, with
  advertisement revenue being the most significant
  amongst all pay-outs. Brands have found that
  working with content-creators has not only helped
  market their products and services to a wider
  audience but made their brand more trusted by
  customers thanks to the creators influence.
  This article aims to allude at the nature of
  services provided by content-creators on YouTube,
  more specifically the service of allowing
  advertisements on their content and the GST
  implications of the same.

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• Nature of Services provided by content creators
• Like any other good or service, it is essential
  to understand whether the service provided by
  content-creators constitute taxable supply1 or
  not. As per section 7 of the CGST Act, taxable
  supply includes the supply of goods or services
  (not subject to exemption under the Act) , made
  for consideration in the course or furtherance of
  business, by a taxable person in a taxable
  territory. YouTubers provide services via the
  internet by posting videos and content on their
  channel with monetisation and providing a
  platform for advertising. As per Section 2(17) of
  the IGST Act2, such services are known as
  Online Information Database Access and Retrieval
  service (OIDAR). In essence it constitutes
  services provided through the medium of internet
  and received by the recipient online without
  having any physical interface with the supplier
  of such services.

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• Due to the unique nature of such service, the
  government has introduced a unique treatment
  compared to more traditional services as well a
  simplified scheme of registration for such
  service providers located outside. Place of
  Supply of services provided by content creators
  For taxability of OIDAR, the place of supply in
  respect of the subject supply should be in India.
  The general rule under Section 13 of the IGST Act
  is that the place of supply of services is the
  location of recipient of services. Where both the
  supplier and the recipient of such service is in
  India, the place of supply would be the location
  of the recipient of service i.e., it would be
  governed by the default place of supply rules.3
  Likewise, where the supplier of service is
  located outside India and the recipient is
  located in India (Registered person), the place
  of supply would be India and liable to GST. Here
  the taxability is via Reverse Charge Mechanism
  wherein the end customer pays tax directly to the
  government. For instance, where a YouTube blogger
  located in UK creates sponsored content for a
  brand located in India, the Indian company would
  be obliged to pay tax under RCM and allowed to
  avail the tax paid as credit, subject to other
  conditions.  This is to ensure that foreign
  suppliers do not have an unfair tax advantage
  should the services provided by them be left out
  of the tax net. Moreover, since the service
  providers are located outside of India, such
  mechanism, simplifies compliance.

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• However, concerns arise as to how tax would be
  collected when the recipient in India is an
  individual consumer, but the supplier is located
  abroad. In such cases it would be impractical to
  ask the individual in India to register and
  undertake the necessary compliances under GST for
  a one-off purchase on the internet. For such
  cases the IGST Act provides that on supply of
  OIDAR by any person located in a non-taxable
  territory and received by a non-taxable online
  recipient, the supplier of services located in a
  non-taxable territory shall be the person liable
  for paying integrated tax on such supply of
  services. Lastly, in cases where the location of
  supplier is in India, but the location of
  recipient is outside India, then there is no
  taxability under the IGST Act4, because it
  qualifies as zero rated supply in terms of
  Section 16 of IGST Act. Thus, from a conjoint
  reading of the above provisions, the legal
  position is as followsS.no Location of
  Supplier and Recipient of OIDAR Services
  Tax
  liability 
• 1.       Where registered domestic
  supplier provides OIDAR services to unregistered
  persons. Domestic Supplier
• 2.       Where registered domestic supplier
  provides OIDAR services to registered person
  Domestic Supplier
• 3.       Where an unregistered domestic supplier
  provides OIDAR services to registered persons.
  Registered Person
• 4.       Where Foreign Supplier is supplying
  OIDAR services to Registered Person
  Registered Person
• 5.       Where Foreign Supplier is supplying
  OIDAR services to unregistered person in India.
  Foreign Supplier

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• Nature of Services in Sharing of Advertisement
  RevenueAs discussed earlier, advertisement
  revenue is one of the most significant way
  content creators earn on YouTube. Once a creator
  meets the threshold set by the YouTube Partner
  Program, the content creator would be eligible to
  monetise their videos and thereby eligible for a
  share of advertisement revenue earned by YouTube.
  Advertisements are placed on YouTube videos via
  Google AdSense therefore the recipient of
  services being Google Asia Pacific, Singapore and
  the supplier of service being the youtuber
  located in India. Hence the place of supply will
  be that of the recipient, outside India.5
  Furthermore Sec 2(6) of IGST Act which lays down
  the conditions for export of services as
  follows
• the supplier of service is located in India.
• the recipient of service is located outside
  India.
• the place of supply of service is outside India.
• the payment for such service has been received by
  the supplier of service in convertible foreign
  exchange or in Indian rupees wherever permitted
  by the Reserve Bank of India and
• the supplier of service and the recipient of
  service are not merely establishments of a
  distinct persons.

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• Thus, if the above criteria are met, it can be
  concluded that the services provided by a
  youtuber, can be classified as export of
  services and be considered as zero-rated supply
  in accordance with Section 16 of IGST Act.
  Section 16(3) allows refund of input tax credit
  that has been accumulated by the service provider
  who gets engaged in provision of zero-rated
  supplies. However, it is to be noted that,
  irrespective of their being no requirement of
  paying GST, he is mandated to obtain a
  registration in light of provisions of Section 24
  of CGST Act. If the total turnover of a Youtuber
  exceeds Rs 40 lakh in a financial year or Rs 20
  lakh (in cases of  special category states), GST
  registration is mandatory.
• Conclusion
• Content creating today is one of the most
  lucrative industry  though often overshadowed by
  the preference over traditional careers.
  Nonetheless its GST implications cannot be
  ignored. As introduced by the erstwhile service
  tax regime and continued in todays GST regime,
  the act of providing monetary services via
  YouTube Videos is classified under Online
  Information Database Access and Retrieval
  services or OIDAR services.

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• However, advertisement revenue earned through
  Google AdSense that forms a major portion of a
  Youtubers revenue is not taxed at all under GST,
  being classified as zero rate supplies. In the
  authors opinion, this practice requires a reform
  as although technically the recipient of services
  is google AdSense, located outside of India, the
  advertisements often shown to the Indian audience
  are of Indian Brands, indirectly benefiting them.
  Thus, this revenue cannot be ignored from tax
  liability. Moreover, several countries are aiming
  to bring in more tax of other form of revenue,
  taking advantage of the highly lucrative platform
  of YouTube. For instance, The South Korean
  government has recently introduced a bill to make
  Internet Service Providers (ISPs) legally bound
  to charge a delivery fee every time their
  consumers access any content. Though, content
  creation is popular due to its low taxability,
  its growth and revenue cannot be ignored by the
  government.1 The Central Goods and Services
  Tax Act 7 2 The Integrated Goods and Services
  Tax Act, 2017 2(17). 3 The Integrated Goods
  and Services Tax Act, 2017 13(12) 4 The
  Integrated Goods and Services Tax Act, 2017 17
  5 The Integrated Goods and Services Tax Act,
  2017 13 Tags goods and services tax, GST, Tax
  on Blogging IncomeRead more at https//taxguru.
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