GST Interpretation that could screw Indian Affiliate Marketers

[Captain Authority]

I hope this reaches enough Indian affiliate marketers. There is something about affiliate income and GST that is making me lose sleep.

This is regarding affiliate commission applicability to export of service benefits(Zero GST). There is this common belief that affiliate income comes under OIDAR service and is zero rated under GST export of service.

But recently I also read some reports saying affiliates could be treated like brokers and so an interpretation could be that they come under "Intermediary service" which means "place of supply" will be "location of the provider" and so it will then NOT be export of service irrespective of foreign recipient. This has disturbed me a great deal.

What are your views on this?

 

[TheVigilante]

I hope this reaches enough Indian affiliate marketers. There is something about affiliate income and GST that is making me lose sleep.

This is regarding affiliate commission applicability to export of service benefits(Zero GST). There is this common belief that affiliate income comes under OIDAR service and is zero rated under GST export of service.

But recently I also read some reports saying affiliates could be treated like brokers and so an interpretation could be that they come under "Intermediary service" which means "place of supply" will be "location of the provider" and so it will then NOT be export of service irrespective of foreign recipient. This has disturbed me a great deal.

What are your views on this?

Don't think anyone talked about this before but @NirvanaWolf and @Gogol what's your take?

 

[Captain Authority]

My worry is, if this is applicable as stated, they could theoretically pile on years of interest over and above 18%

Most CAs say it is export, but a rather studious careful CA laid the above scenario out, and said those affiliates could be facing issue someday...it got me thinking.

 

[Gogol]

Don't think anyone talked about this before but @NirvanaWolf and @Gogol what's your take?

To be honest, I am not really sure. I will ask my ca and find out what she thinks.

My logic says that if you are showing the earning as "other income", it won't be subjected to gst (given that you are submitting tax as an individual, and not as a company). But then, I am horrible when it comes to tax calculation. So I don't worry about it much.

As for our business, it is all managed by our ca, and I don't even know/care what she is doing. My wife and my ca knows more.

 

[Captain Authority]

@Gogol if you are GST registered, you need to file your service revenue. Ofcourse concealing is a different matter.

 

[NirvanaWolf]

I think it all comes down to your affiliate's payment method. If they're are paying you via paypal, you can just claim it as income from export of services and name any service you want. If they are wiring you the money and it's in USD, just ask your bank for FIRC and then again claim it as an export of service. If you're getting paid in INR then there's a problem.
Is there any way they can find out you're an affiliate? Although I don't think this is going to happen, what you've mentioned in your post. You being an affiliate for a non Indian product and earning in USD would still count as export of service.
Keep this thread updated if anything concrete from the IT department comes up though.

 

[Captain Authority]

I think it all comes down to your affiliate's payment method. If they're are paying you via paypal, you can just claim it as income from export of services and name any service you want. If they are wiring you the money and it's in USD, just ask your bank for FIRC and then again claim it as an export of service. If you're getting paid in INR then there's a problem.
Is there any way they can find out you're an affiliate? Although I don't think this is going to happen, what you've mentioned in your post. You being an affiliate for a non Indian product and earning in USD would still count as export of service.
Keep this thread updated if anything concrete from the IT department comes up though.

We could say it's advertising income and it would be fine. But the amounts from some affiliate companies like Amazon for instance are varying numbers. How to explain that.

 

[Gogol]

@Gogol if you are GST registered, you need to file your service revenue. Ofcourse concealing is a different matter.

Are you talking about tax submission as a business, or as an individual? I guess you submit as a sole proprietorship owner right?

This thread is good by the way. Hope it clears things up, for me as well.

 

[Captain Authority]

Are you talking about tax submission as a business, or as an individual? I guess you submit as a sole proprietorship owner right?

This thread is good by the way. Hope it clears things up, for me as well.

As a firm. But if you are GST registered, there is no distinction wrt GST returns and Export claim.

 

[Gogol]

As a firm. But if you are GST registered, there is no distinction wrt GST returns and Export claim.

I see, totally out of my alley then. I will be sure to ask our CA tomorrow.

 

[Captain Authority]

I see, totally out of my alley then. I will be sure to ask our CA tomorrow.

Please do. Interested in more insights.

Does anyone have insights on the "intermediary service" jeopardy with respect to affiliate income applicability as export of service. Mentioned in the opening post.

 

[MisterF]

Moved to Business & Tax advice, but maybe seek advice from a tax advisor in your country about this?

 

[Captain Authority]

I think below is a justification.
Ref: https://www.cbic.gov.in/resources//htdocs-cbec/gst/OIDAR.pdf
Online Information Database Access and Retrieval services
(hereinafter referred to as OIDAR) is a category of services
provided through the medium of internet and received by the
recipient online without having any physical interface with the
supplier of such services.

The IGST Act defines OIDAR to mean 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


Inferring above:
For all OIDAR services - place of supply is location of recipient. And so if you have a foreign client and receive foreign currency, it is export.
It is fairly clear that affiliate marketing and its associated income comes under OIDAR as

1. Service is provided over the internet.
2. Automated with no physical interaction.
3. Is a form of Advertising on the internet.


Now if someone says - what you receive is still a commission in the end, no matter how you provide service and so why should you not be considered "Intermediary service" under which Exports don't qualify.

An effective counter could be this:
Foremost is what your service is about and how you provide your service. Once we are classified under OIDAR, everything else is secondary.

Further views on this are appreciated.

 

[Faceless Men]

the process to get FIRC is easy now. You can bulk request it from paypal. I was getting paid using payoneer and the process was a lot harder. First wait for 1-2 hours in live support system and then request FIRC for 1 transaction at a time. FIRC got delivered after 3 months to my home address through courier

 

[Captain Authority]

the process to get FIRC is easy now. You can bulk request it from paypal. I was getting paid using payoneer and the process was a lot harder. First wait for 1-2 hours in live support system and then request FIRC for 1 transaction at a time. FIRC got delivered after 3 months to my home address through courier

You dont even need FIRC now. A simple remittance note or remittance slip is enough as per RBI. Kotak for instance has automated 'remittance advice' slips.

But this thread is not about FIRC. It is a peculiar technicality wrt "affiliate commissions" by which a possibility could(?) exist for the export claim to be rejected irrespective of the firc. Read my opening post.@Faceless Men

 

[NirvanaWolf]

You dont even need FIRC now. A simple remittance note or remittance slip is enough as per RBI. Kotak for instance now automated remittance advice slips.

But the thread is not about FIRC. It is a peculiar technicality by which a possibility may exist for the export claim to be rejected irrespective of the firc. Read my opening post.@Faceless Men

Your annual income exceeds 20 lacs INR? If not, you don't need anything. For FIRC Paypal charges 100 INR + GST for each transaction upto 20 transactions and if there are more than that then a bulk fee of 2000 + GST.
You can also look at the option of creating another paypal account using one of your family member's details if their annual income is not too much. Why are you so worried about GST is beyond me. If you're earning that much that you have to worry about paying large sums in GST, then just hire a CA and let him/her handle everything for you.

 

[Captain Authority]

Your annual income exceeds 20 lacs INR? If not, you don't need anything. For FIRC Paypal charges 100 INR + GST for each transaction upto 20 transactions and if there are more than that then a bulk fee of 2000 + GST.
You can also look at the option of creating another paypal account using one of your family member's details if their annual income is not too much. Why are you so worried about GST is beyond me. If you're earning that much that you have to worry about paying large sums in GST, then just hire a CA and let him/her handle everything for you.

Yes. This will be of interest to GST registered entities. Not unregistered ones. I thought that was obvious. Cannot edit the opening post now.

I have a CA who has guided me to claim export benefit. There are also few CAs who talk about the technicality of "Intermediary service" and say there is reason to consider affiliate income under that...

 

[NirvanaWolf]

Yes. This will be of interest to GST registered entities. Not unregistered ones. I thought that was obvious. Cannot edit the opening post now.

I have a CA who has guided me to claim export benefit. There are also few CAs who talk about the technicality of "Intermediary service" and say there is reason to consider affiliate income under that..

Assuming you have multiple streams of income, I'd still advice you to move your affiliate earnings to a family member's account who is not registered to file GST returns. If that's not an option then stick to what you're doing currently because I still think if a clause comes up disregarding affiliate income as export of services you still can claim it as an export of service. I don't think there's a way to figure out the source. Freelancers receive payments from multiple sources, GST department can't go on and verify the source for every transaction. You just need to prove that it was a foreign currency remittance for which you can use FIRC or remittance note like you mentioned above.

 

[ZionIce]

Take a look at this:

https://affiliate-program.amazon.co.uk/help/node/topic/GMF6YYSRPV4U44AL

It explains how it works in the EU.

This is because, under European VAT legislation, the marketing services provided by EU associates established outside Luxembourg are subject to VAT in the country where the recipient of the service is established (refer article 44 of the VAT Directive 2006/112/EC).

So Amazon considers it marketing services.

 

[ZionIce]

I think if you're getting paid from Amazon Associates India or an Indian company, then yes you would need to charge them GST or something and they would get it back as a refund.