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.
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 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).
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.