How GST effect Google AdWords or Google campaigns in India

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How GST effect Google AdWords or Google campaigns in India

gst on google adwords india

With lots of speculations and number of legal hurdles, few in supports and few against, India’s new taxation system called Goods and Service Tax is rolled out on 1st July 2017. GST will replace all the indirect taxes (like Service tax, value added tax, custom duty, entertainment tax, excise Duty etc.) levied by the Central and the state government on various Goods and Services in India. This will result in the revision of tax calculation and collection method, and at the same time, GST will also impact the Google AdWords’ pricing system. Google AdWords is the advertisement service given by Google to various businesses to display their Ads on the Google and the various advertising networks. For this advertising service Google never charge Ads for display, instead, the Company has to pay only for clicks made on the links advertised called Cost per Click (CPC). “Insurance” is the highest charged (CPC of $54) keyword by the Google AdWords.

New Tax Calculation- An Idea in GST in Google Payment

With the new Start-ups pushing a lot of money into the market, the AdWords pricing is also rising three to four-fold in the past few years and with the GST in India, it is expected to further rise in the cost of availing these Google services. Right now the Google is charging 14% service tax (exclusive of 0.5% Swachh Bharat cess) for Google AdWords and this is expected to be 18% in GST system. It means earlier for the advertising expense of Rs. 1, 00,000 you have to shell out
Rs. 1, 00, 000 + 14 % Service tax
= 1, 00, 000+14,000
= 1, 14, 000

But now under GST you have to spent
Rs. 1, 00, 000 + 18% Service tax
= 1, 00, 000 + 18,000
= 1, 18, 000 (all calculation is exclusive of 0.5 % Swachh Bharat cess and 0.5 % Krishi Kalyan cess)

This means you have to spend 4,000 extra under GST.

It’s a clear indicating fact from the above calculation that the Google AdWords will cost you more than earlier taxation system. 12-18% GST rate for most products; foodgrain exempted, 5% tax on coal.

Google AdWords Strategy

Google AdWords charges you on the basis of your Ad Rank which is calculated on the CPC and the Quality score (a Google metric system to score you Ad relevancy and usefulness). However you can enhance the performance of your Google AdWords efficiency on the Day-parting (during what time your Ad delivers you more relevant clicks), Geo-Targeting (which Geographical region you find more target customers), Device-Targeting (desktop, tablet, smartphone etc. which deliver more).

Google under GST

GST is a one time tax, it integrate the old idea taxation model in which the both Central government and the State government apply taxes on the various goods and the services. Google will identify your tax category, taxes will fix based on the categories.

12 Comments

  1. Yacon Root says:

    Awesome Website. Very much enjoyed reading.

  2. Jill D says:

    How should an ad agency charge GST for adwords to their clients?

    • FajrNunu says:

      Hi Jill,

      We charging commision base from clients for PPC. For example – if we charge 15% for RS.5000/- to Rs.50,000/- , agency earning will be 15%, so agency can charge commision + its GST.
      When google accept payment they will automatically deduct their GST from that payment. Client can submit this GST for his Tax submission.

      Hope it will clear.
      Thanks

  3. Jill D says:

    Just need some more clarification. If the agency spends Rs.5000 on adwords and the agency is charged Rs.900 as GST. Does the agency charge 15% commission on Rs.5900 or Rs.5000? And should GST to client be charged only on agency commission or the total amount.

    • FajrNunu says:

      In case of PPC, client spends 5000 (Paying 5000 to Google – google will deduct their GST almost Rs.800/- from that – so agency can run ad Rs.4200/-) this is a rough calculation –
      If client spends Rs.5000/- agency can charge 20% or 15% – agencys 20% commission will be Rs.1000/-
      In this case agency can prepare two bills to clients – Amount spends 5000/- with tax
      Commission bill – 20% ie 1000/- +tax
      Rs.1000/- +tax will be agency’s earning.
      For spending amount Google is charging, agency dont have right to charge that. Agency can charge commission + tax only.

      • Jill D says:

        Thank you for your reply. So can agency raise one bill to client with the following amounts:
        rs.5000 (google spend)
        rs.1000 (agency commission)
        rs.180 (GST – charged only on commission)
        Bill Total – Rs.6180

        Is this correct?

  4. Jyot says:

    Hi,

    The Indian Start Ups have to pay GST under RCM on google ads spends. Many of them are against such compliance but have to follow them by default to run the businesses smoothly. On the other hand Google too has conveniently avoided to issue gst invoices to Indian Start Up Companies leading to confusion whether to pay GST or not. Is there any solution to this. ?

    • FajrNunu says:

      Dear Jyot,
      Google will deduct GST from individual account and business account. Startup companies can consider like individual but then also deducting the tax. No solution to escape from this. But if we have GST number we can submit this tax details when we file our tax.
      Thanks

      • Jyot says:

        Hello Team,

        The unavailability of google invoices has certainly created a confusion scenario. Is there anything that can be done to resolve this issue. Please let us know. Thanks.

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