Whether the advertisers are registered with the Google entity in India or outside India, GST at a rate of 18% is applicable on Google Ads advertisements. In this fast paced world of digital advertising, Google Ads has become a popular platform for businesses to promote their products and services. So, it has become important for advertisers to understand the taxation aspects associated with advertising through Google Ads.
If advertisers are registered with the Google entity in India, they will be charged GST at 18%, which will be mentioned on the invoice. Advertisers can provide their GST number to Google and claim the benefit of the input tax credit by intimating their GST number to Google through the appropriate channels.
For advertisers utilizing Google Ads registered outside India, they are still liable to pay GST at 18%. However, in this case, Google will not charge 18% GST on the invoice. Instead, the advertisers themselves are required to pay the 18% GST under the Reverse Charge Mechanism.
Apart from the 18% GST, a Tax Deducted at Source (TDS) of 2% is also applicable on Google Ads advertisements. However, it is also important to note that TDS compliance is only required for advertisers who need to get their Tax Audit conducted by a Chartered Accountant (CA). Small businesses that are not required to undergo a tax audit are exempt from TDS compliance.
GST and TDS are distinct components of taxation. GST is levied in accordance with the GST Acts, while TDS is deducted as per the Income Tax Act. Moreover, GST is payable on top of the advertisement charges, whereas TDS at 2% is deducted from the payment made to Google.
To illustrate the calculations, let's consider an advertising expense of Rs. 1,00,000 on Google Ads. The applicable GST and TDS would be as follows:
Google Ad Expense: Rs. 1,00,000
GST @ 18% (18% of Rs. 1,00,000): Rs. 18,000
TDS @ 2% (2% of Rs. 1,00,000): Rs. 2,000
Balance amount payable: Rs. 1,16,000
The publisher will receive the balance amount of Rs. 1,16,000 after the deduction of TDS. However, Google requires advertisers to pay Rs. 1,18,000 initially, and once the TDS of Rs. 2,000 is deposited with the government, a credit of Rs. 2,000 will be given.
The TDS amount of Rs. 2,000 is deducted under Section 194C and must be deposited with the government by the publisher. Advertisers are required to mention the PAN No., Entity Name, and Address of Google Ads when depositing the TDS amount.
After the TDS is deposited and the TDS Return is filed, a TDS Certificate in Form 16A will be generated. Advertisers must share this Form 16A with Google through email or courier, depending on their billing method.
The equalization levy was introduced in the financial year 2016-17, this equalization levy is applicable when Indian advertisers advertise with entities registered outside India. This levy aims to make foreign publishers register in India. The rate of the equalization levy is 6%, and it is only applicable to advertisement expenses incurred outside India. Advertisers can avoid this levy by advertising with entities registered in India.
In conclusion, understanding the taxation aspects of advertising through Google Ads is essential for businesses to comply with the relevant regulations. Both GST and TDS play a role in the cost structure of Google Ads advertisements, and advertisers should be aware of their obligations to ensure smooth transactions and compliance with the tax authorities. By knowing about these aspects, advertisers can effectively manage their advertising expenses and optimize their overall tax liabilities.
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