TAXAJ

Vlogger - YouTuber - TikToker: Taxation & Other Implications

The recent years have witnessed the emergence of a new profession—video blogging—more popularly called as vlogging. YouTube is its main medium. Many of you might be ardent followers of such YouTubers who give quirky life lessons, offer fashion tips, review books or movies or just repost clips from popular movies among others. India can now boast of its own YouTube stars with millions of subscribers.

Several budding vloggers, who make a mint by uploading popular videos (ideated by self or from credited sources), are uncertain about their tax implications. Let us explore this in detail. Before getting into tax rules for YouTubers, it is important to determine the source of income of such vloggers.

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Are you eligible business under Presumptive tax Scheme? Disclose income under section 44AD & sec 44ADA and file tax return with TAXAJ.

Created by potrace 1.15, written by Peter Selinger 2001-2017

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  • Businesses having annual turnover under Rs. 2cr and declaring income above 8% (no audit)
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  • Bank statements for the financial year
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  • Form 26AS Tax Credit Statement
  • Bank statement if interest received is above Rs. 10,000/-

How Youtube & Google generates their revenue ?


YouTube is a subservient unit of Google and completely synonymous with its parent body Google which controls it thoroughly. Accounts on both sites are linked up, search algorithms match each other. If given the option, Google will provide video results to YouTube before any other video hosting site. The two works seamlessly, the world's most powerful search engine matched with the world's most popular video hosting site. YouTube gives YouTuber (any person who uploads it's content at YouTube Platform) an option to monetize its content which if it opts for, then content gets commercialized in nature, meaning hereby that the content is available for advertisement spots. YouTube system streamlines displaying advertisements of third parties or sponsors in these slots by over lapping ads upon the original content for few seconds.


This entire process triggered post after execution of an agreement with Google containing certain terms and conditions to which a YouTuber has to agree. By having agreed to such agreement Google initiate placing ads over the content so monetized at YouTube platform, emphatically the YouTube in turn confers the right and yields the permission to its parent entity Google to access the monetized content and allows it to place ads overlapping the monetized content for predetermined slots. YouTuber while agreeing to monetization of content authorizes and vests right to Google(YouTube) to place and overlap the advertisements of third parties or of sponsors on such content which remains live over YouTube Portal.


This entire authority transmission as mentioned before executed by opening an Adsense account through an instrument agreeing the Monetization terms and conditions by Google enunciated in very same instrument of covenant. Once all set by agreement then the revenue sharing model between YouTuber and Google comes into picture. Google charges the spots to the sponsors or advertises and a certain percentage of revenue so generated by Google thereafter shared with the content owner or say YouTuber. This is how Google and YouTuber both earns the money.

Nature of Income of Vloggers


One aspect that attracts entrepreneurial minds to vlogging is that there are no age constraints and everything you make will be owned by you. It doesn’t require a lot of investment. Many YouTubers have started with uploading videos shot on their mobile phones. Many even keep their regular jobs until they get a breakthrough. Here are the kinds of income made by YouTubers.

-Payment from YouTube for audience engagement (assessed based on the number of reach, views and comments)
-YouTube advertisements
-Consultancy services on video making, designing and optimisation

-Affiliate sales or other freelance income from YouTube

Tax Implications for Income from YouTube


You will be taxed as a sole proprietor unless you register your business as a company, LLP or Partnership Company. Tax provisions applicability depends on the source and nature of income. Here, a YouTuber’s income is considered as business income.

Being a service sector business, the assesses can only opt for normal provisions under the Income Tax Act,1961. If the gross total income exceeds Rs 1 crore, then section 44AB i.e., tax audit will be applicable to the YouTuber. Additionally, Tax Deducted at Source(TDS) provisions will also be applicable to you on every receipt of payment. You can view your TDS amount through 26AS, which can be generated electronically.

If your gross turnover is below Rs 1 crore, then you have to follow the normal tax provisions to calculate taxes and maintain books of accounts. But if your gross total income exceeds Rs 1 crore, you must follow all bookkeeping requirements under Rule 6A and get your accounts audited by a Chartered Accountant(CA) under section 44AB of Income Tax Act,1961. You will have to pay taxes on the net taxable income after considering all the business expenses and depreciation as per the income tax slab applicable to you.

You may also have to pay advance tax if your total tax liability is more than Rs 10,000 in a financial year. You have to pay advance tax in four instalments given your tax liability is more than Rs 10,000 in a financial y year (FY).

Starting from June 15 , 15 percent of the advance tax has to be paid. Then by September 15, you should have paid 45 percent, by December,  75 percent of the advance tax liability and by March 15, 100 percent of it.

You have to pay your advance tax liabilities by the due date after considering the amount of TDS that has been already deducted from payments made to you. This TDS can be cross-checked from Form 26AS.

Don’t forget to claim the below expenses


a. General Expenses: If you can submit the required bills, expenses directly related to earning your income are fully deductible. It includes your internet bill, costs incurred for computer or camera maintenance and any other cost for creating and uploading the videos.

b. Other Expenses: Costs to promote and market your video expenses.

c. Depreciation: Please remember that the expenditure of assets cannot be deducted completely deducted against your income. For instance, you can only claim 15 percent depreciation of the camera price and 60 percent depreciation of the cost of the laptop.

In case you have calculated your taxes under normal provisions and tax audit does not apply i.e., your gross total income is less than Rs 1 crore, you will have to file your income tax return by July 31 of the assessment year. For assesses who are subject to tax audit, the return filing deadline is usually September 30 of the assessment year.

Detailed Analysis:

A YouTuber who uploads it's content on YouTube and receives payments from Google though Adsense account and in addition to this it also avails online advertisement services offered by Google and Facebook for advertising itself on social media to promote and increase the viewership of content, in lieu of an amount as consideration for such services. Where Google/Facebook deducts the amount of consideration from the credit card of the YouTuber and no invoice is made available for the same by Google/Facebook.


Scope of Advice:-

  • Is GST liable to be paid on revenue earned from Google (YouTube)? Or is Reverse Charge Mechanism (RCM) applicable to such case, whereby Google (YouTube) under an obligation to discharge GST liability on behalf of YouTuber?
  • Is GST liable to be paid on Reverse Charge Mechanism (RCM) on advertisement services offered by Google/Facebook and undertaken by YouTuber for promoting the viewership of its content?
  • Is TDS required to be deducted on payments to be made to Google/Facebook for advertising services?
  • Is form 15CA/15CB required to be filed in case of payment of consideration for advertisement services to Google/Facebook ads?


Matters Related to GST


GST Implications on Revenue Part on Income earned through YouTube.


YouTuber uploads the content on YouTube server, and such a server is not located in taxable territory. Taxable Territory here means the territory to which the provisions of this Central Goods and Service Tax Act 2017 applies, which extends to the whole of India except the State of Jammu and Kashmir as stated under sub section 2 of Section 1 at the moment. The Content so uploaded remains available on internet which can be accessed by anyone from anywhere at any time through internet. YouTube in reciprocation shares the income with YouTuber which it generates from overlapped advertisements of third parties upon YouTuber's content.


Whether Uploading and Monetization of Content on online Database of YouTube server is Supply of Service?


Before concluding anything in the context lets understand the position of law pertaining to following terms:

  • Meaning of Supply
  • Meaning of Online Information and Database Access or Retrieval Services
  • Meaning of Service

Meaning of Supply


Meaning of Supply The word 'Supply' has been defined under Chapter III, section 7 of CGST Act 2017 to be read as under :


Section 7


1. For the purposes of this Act, the expression 'supply' includes-

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

(b) import of services for a consideration whether or not in the course or furtherance of business; and

(c) the activities specified in Schedule I, made or agreed to be made without a consideration and

(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.


2. Notwithstanding anything contained in sub-section (1),-

(a). activities or transactions specified in Schedule III; or

(b). such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. 


3. Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as—

(a) a supply of goods and not as a supply of services; or

(b) a supply of services and not as a supply of goods.


On a critical analysis of definition of Supply it becomes so conspicuous that the law makers wanted to cover wide range of transactions into the term Supply and thus they came up with a definition which is Inclusive definition in nature and therefore carries a wide scope. Would like to heed at clause (a) of sub-section (1) of section 7 which cites as under -

'all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business'


Under the definition following combination of words has played a decisive vital role, to identify those basis de rigueur prerequisites in an act to decide whether such an act is supply or not:-

1. All Forms of Supply

2. Made or Agreed to be Made

3. For a Consideration

4. In Course or Furtherance of Business


While framing an interpretation of the definition it can be concluded that any act or action which is sort of a supply, delivery, contribution, tendering, furnishing or any other act by whatever name called or known as similar in nature, if has been under taken or has been promised to be undertaken for a consideration or in lieu of something in return or having an identity of quid pro quo, either in course of a business or in furtherance or perpetual run of a business then such an act or action has significant potential to be termed as Supply.


If any of the element among these four elements is missing then such an act cannot be tantamount to Supply. For constituting ‘Supply' occurrence of all these four elements is an exigency and thus an act cannot be construed as supply unless all these four elements not been conjured together.


So when a content owner uploads its content on online YouTube Portal then it means handing over and delivery of the content to YouTube. And when the same content is been monetized after opening an Adsense account with Google followed by agreeing to the terms & conditions of the agreement in place then it implies commercial intention on the part of Content Owner, which is a order of furtherance of Business.


As earning form YouTube starts after reaching a certain amount of viewership so at the moment content surpasses the stipulated viewership, revenue starts generating in hands of YouTuber. As soon as revenue in hands of YouTuber starts accruing then all four components as discussed above eventually coalesces and brings Supply in legal terms into existence, as all these four factors like Making Supply under the cover of Agreement, in Furtherance of Business and for a Consideration gets over at the very moment when revenue in hands of Youtuber had accrued. Therefore at the point where YouTuber starts generating revenue from YouTube post after monetization process of content at the same very point ‘Supply' of content said to be accomplished.

Meaning of Online Information and Database Access or Retrieval Services


YouTube provides online services on internet which is covered within the meaning as specified under section 2(17) of IGST Act 2017.


Section 2(17) of IGST Act: Definition of 'Online Information and Database Access or Retrieval Services' (CHAPTER I - PRELIMINARY)


''online information and database access or retrieval services' means services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention and impossible to ensure in the absence of information technology and includes electronic services such as,-

(i) advertising on the internet;

(ii) providing cloud services;

(iii) provision of e-books, movie, music, software and other intangibles through telecommunication networks or internet;

(iv) providing data or information, retrievable or otherwise, to any person in electronic form through a computer network;

(v) online supplies of digital content (movies, television shows, music and the like);

(vi) digital data storage; and

(vii) online gaming.


The definition is lucid and eloquent inclusive definition in nature and it has categorically addressed digital content like movies, television shows, music etc therefore without shadow of doubt as per clause (v) online supplies of digital content like movies, television shows, music etc is a service within the meaning of section 2(17), which YouTube actually do. Hence uploading content to YouTube portal constitutes a service supplied for which a YouTuber or content owner is to be discharged with a consideration by sharing the revenue earned by Google from online advertisement business.

Meaning of Service


As per Sec 2(102) of CGST Act


"services" means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.


Service definition signifies that service nature is intangible unlike goods which have physical existence. As content is online media that is on YouTube server so it do not have Tangibility in its nature ipso facto it is not a commodity or a good rather a service.


When all these explanations put together then it postulates and makes it very clear that uploading content and monetizing same on YouTube portal is Supply of Service undertaken in computerized environment by way of online Information and Database Access or Retrieval Services .. And when it is Supply of Service then defiantly Indirect Taxability has to creep in.

Whether Such Uploading of Content on YouTube and Monetization of the same is Taxable Supply with in GST Regime?


Taxability depends upon the Place of Provisioning of service which can be understood from below provisions and elucidation thereof:

The Contracting Agency of YouTube is Singapore Based which is Google Asia Pacific, Singapore.

As per section 13 of IGST Act 'Place of supply shall be the location of service recipient'. In the instant case neither Singapore is in taxable territory nor is the YouTube server in taxable territory.

The contracting agency from YouTube is based in Singapore thus place of supply of service impliedly becomes location of service recipient which is Singapore.

Therefore if place of supply is not in Taxable Territory then question of levying GST does not arise here. Whether such a service can be treated export?

Section 2(6) of IGST defines export of services as under:- 'Export of services' means the supply of any service when,
(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) 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
(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8. 

Hence if a person is providing services as YouTuber, located in India to Google Asia Pacific, Singapore, which is located outside India, receives payment in convertible foreign currency which is USD, and Such YouTuber and Google Asia Pacific are not merely establishments of a distinct person then it is to be classified as Export of Services. So YouTuber who is uploading content at YouTube online platform is exporting content services.

How much GST shall be levied on Export of Service?


As this service has been provided to a person which is neither in taxable territory nor the place of supply of service is situated in taxable territory so no question of levying GST on such service arises. However, section 16 of IGST Act has articulated the subject as under:-


Section 16 - Zero rated supply of Online IGST ACT - THE INTEGRATED GOODS AND SERVICES TAX ACT, 2017 16.

(1) 'zero-rated supply' means any of the following supplies of goods or services or both, namely:-
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

(2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies; notwithstanding that such supply may be an exempt supply.

(3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:
(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or
(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of section 54 & of the Central Goods and Services Tax Act or the rules made thereunder.

Section 16 of IGST Act has eliminated the ambiguity over the matter of Levying GST on Export of Such services.

Firstly Export of service is to be treated as 'zero rated supply' as per section 16(1)(a). Further, Subsection 3 of section 16 has given the procedure to be followed while exporting goods and/or services. It has given two options that one either has to export the services under a cover of Bond/Letter of Undertaking without payment of GST or else pay GST and take refund of the same later on.

Second option of paying IGST first and then claiming refund of the same later on as per section 16(3)(b) is not viable and prudent process because it will block working capital of business unnecessarily and that too without any conclusive assurance to get refund in hands-on time.

Whereas, First option as per section 16(3)(a) sounds more pragmatic, wise and judicious which not only shirk off from payment of IGST on output export of service but also gives an option to get refund of that unutilized input GST/Duties on those goods and services which have been utilized as input for provisioning of such exported services.

Therefore Section 16 of IGST Act will prevail, although there is still a scope to negate and avoid section 16 owing to the reason, when service recipient and place of provisioning of service both are not in taxable territory then no question for levying GST arises. But until and unless any explanatory circular or a notification does not come in this matter from CBIT or Government respectively till then being in adherence to Section 16 of IGST Act 2017 is a compulsion and so as it is recommended.