Impact of GST on Your Online Earning

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India has introduced new GST- Goods and Service Tax on 1st July 2017. Since the introduction of economy, GST is the single largest as well as boldest tax reform that aims to provide cohesive tax across the country. With this glorified system of taxation, economy would certainly pace up its speed and would make it easier for trade and industry in respect to the streaming indirect tax system. The traders and industries need to pay ‘One Tax’ and different other indirect taxes would be included within GST!

PM Narendra Modi said “This is a historic place where Maulana Azad and Sardar Patel struggled for freedom from foreigners. And, there cannot be a better place to implement GST than this.

What is GST?

GST- Goods and Service Tax is a tax charged on manufacturing, sale and consumption of different goods and services on national level. GST is a smart substitution for the indirect taxes that are charges by state as well as central government. GST would not affect taxes on exports and the direct taxes that include corporate tax, income tax as well as capital gain! GST would be applied on all types of good excluding crude petroleum, diesel, motor spirit, natural gas and aviation turbine fuel. GST would be applicable on all types of services excluding a few! As International trading of different services is increasing in India, GST has turned out to be a global standard.

The proposed GST system would further shape up as Dual GST that is charged by the state and central government at the same time. Dual GST comprises- Central GST/CGST-Charged by Central Government, State GST/SGST- Charged by State Government and Integrated GST/IGST- Charged by Central Government for the supply of goods and services in inter-state level.

President Pranab Mukherjee said “GST is a tribute to the maturity and wisdom of India’s democracy.”

GST is welcomed by online businesses!

GST is a regarded as a welcoming step for online businesses and especially the E-commerce businesses. GST would cut back on the integration of goods and services in a seamless manner across India.  The direct taxes applied on the transactions that are undertaken by the online businesses get absolute clarity by GST. This is an initiation when the laws of E-commerce attain stability which is quite favourable for high growth and development.

Incredible benefits of GST for online businesses

GST has amazingly restored the current concept of the indirect taxes as well as improved the tax compliances. Online businesses can enjoy incredible benefits for the key impact of GST!

  • Easier for start-ups

GST drives uniformity for the online businesses with centralized registration that makes it quite easier to start-up an online business. The old process of VAT registration that was issued by Sales and Tax Department was indeed a rigid process which is finally replaced by this centralized system.

  • Freedom

The online businesses having turnover more than Rs 5Lakhs required VAT registration in earlier days but GST increased it to Rs 10Lakhs that has relieved the new businesses with the freedom.

  • Simpler form of taxation

GST integrates all taxes into one that has minimized the complications of double tax system that was applicable earlier.

  • Logistic costs are reduced

GST has eliminated the taxes charged for movement of goods and services in state borders. This in result would lower down that costs that are charged for logistics. For reduced logistic costs, the demand of interstate logistic services would get accelerated and flow of goods in interstate level would get seamless. GST has reduced the market competitiveness as the online traders would now trade under a tax that is chargeable once.

  • GST brings absolute clarity for E-commerce

The E-Commerce companies get absolute clarity in regards to the tax applicable for the transaction with GST.

  • SPV setup would ease the process

GST and its success are highly dependent upon robust IT system. GSTN is a Special Purpose Vehicle- SPV that has been setup for providing a common portal for return file, e-payment and registration facilities.

  • Collection of taxes

GST has been designed in such a way that the payments made to the supplier would remain focused on collection of taxes at sources. GST makes it mandatory for the e-commerce companies to pay the taxes on the price paid for purchasing the goods from the suppliers but this is applicable if the company decides to sell the product at discounts.

Finance Minister Arun Jaitley said “India will launch its biggest tax reform at midnight. India will awake to limitless possibilities. It marks the beginning of a new journey for India.”

GST for online bloggers and website publishers- A boon or spell

Apart from the E-commerce traders, any website publisher or the online bloggers make money from advertisements or by selling e-books or by affiliated market. As GST has made specific and separate provisions for the e-commerce industry, the e-commerce operators as well as the online sellers trading goods and services on online platforms need to get themselves registered.

How the online bloggers and website publishers earn?

The online bloggers or the website publishers drive revenue by performing activities like-:

  • Online advertisement display through 3rd parties like Google and adsense
  • Selling e-books through online portals directly or by listing on other e-commerce sites
  • Affiliation marketing
  • Native advertisements or Sponsored posts

The online traders need to pay GST on the advertisements that are displayed on their website, or affiliate income and also on the earned revenues that are generated by performing any activities. No specific exemption on taxes is available for the bloggers or the web-publishers. Thus, this determines that blogging is not going to be a revenue generating activity as taxation is concerned with it. As per the applicable rules, the new bloggers or the website publishers need to obtain registration for starting a new venture.

There are several ad-networks which are used by bloggers and other website publishers for monetizing their properties. The incomes generated from ad-networks are received in foreign currency thus come under export.

Zero Rated Supply for online bloggers and website publishers

Section 16(1) of GST mentions ‘Zero Rated Supply’. Export of goods and services are classified under zero rated supply as per this section. With this, it can be determined that the bloggers or the website publishers need not pay any tax on the income that are received from adsense or any other ad-networks. But the trader must be ready to prove that the revenue generated from ad-networks is export in nature. If the definition of export of services is analyzed, the bloggers or the website publishers those generate revenue from ad-networks satisfy the conditions as per the applicable section in GST.

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