Service Tax on Free-lancers and Bloggers

All the doubts, ambiguities, questions, queries of a tax-payer or a non-tax payer (every non – taxpayer is a potential tax payer…..Isn’t it??)  somehow comes to rest at Service Tax. Either because of its volatility. Or because of the controversies that seems to attach itself magnetically to every new implementation.   

One such ruling came in the form of declaration from the Finance Minister w.e.f. 01^st July, 2012 onwards. It expressly stated that service tax would not be levied on sale of any advertising space. Prior to the exemption declared w.e.f. 01^st July, 2012, service tax is applicable on sale of any advertising space .This exemption is applicable for advertisements given in online media and print media which includes Google AdSense.

Service Tax is payable by any person whose revenue from providing of any type service during the year is more than Rupees Ten Lakhs (Rs. 10, 00,000). This service tax is also levied on bloggers and freelancers as they also provide a form of Service. A freelancer is a person who works as a writer, designer, performer, or the like, selling work or services by the hour, day, etc. rather than working on a regular salary basis for one employer.

Service tax will be levied only when the revenue crosses Rs. 10 Lakhs. Individuals whose total revenue is less than Rs. 10 Lakhs (excluding ad sales) have been exempted from the levy of service tax. This is known as Small Scale Exemption.

Let us take some examples:

Situation -1:

Harry earns total revenue of Rs. 12,00,000 in a month, out of which Rs. 8,00,000 is obtained from ad sales. So, his revenue from other sources will be Rs. 4, 00,000. Hence, he will not fall under the radar of service tax.

Situation -2:

Mike is an Indian resident. His income consists of his salary income as well as income from his freelancing works. His freelancing income is foreign income and in the nature of business support service. Is he liable to pay service tax on his freelancing income?

The answer is “yes”. However, there is always a twist in the tail, like always. If he satisfies the following two conditions, it would be considered as Export of Service and hence not chargeable to service tax:

1) The service is provided in relation to the business or commerce of the client and the recipient of service is located outside India; or service is not provided in relation to business or commerce of the client and the recipient of service is located outside India at the time of provision of service.

2) Payment should be received in convertible foreign exchange.

Situation -3:

Simply altering situation- 2. Freelance income of Harry is not foreign but domestic income. What will be his service tax liability?

In this case, he will be under the purview of service tax. However, till his revenue from freelancing crosses Rs. 10, 00,000, he will not be liable to pay service tax.

Hence, to conclude, service tax is applicable on freelancing services provided it does not include SALE of ad space and are not classified as export of service. In this regard, it will be prudent to point out that it is only the “SALE” of service that is exempted. The other operations like SEO service, content management, etc continue to remain under service tax regime.

_____________________________________________________________________________________________

Feel free to write to us,at [info@taxmantra.com] or call us at +91 88208208 11.