In my view , Indian advertisers who are taking services of Google ,USA for business campaign or commercial campaign, are themselves liable to pay service tax and not Google USA.Google is the leader in online advertising space selling. Its wonderful program AdWords is very effective way of advertising for business concerns because of its targeted appeal.Google also provides different types of ad formats.
It is now undisputed that the online space selling for advertisements is "taxable service" under the Service Tax law.Much before the explicit entry of online advertising space sale brought within Service Tax ambit , Authority on Advance Ruling had ruled that the Google was liable to pay service tax on sale of space on its website.Read this posting for knowing more.
Now , under the Service Tax law of India , it has been provided that in case
In this regard, it is interesting to know that Google has a permanent establishment in India.However, the AdWords or other advertisement program are run by Google ,USA and not its Indian office.The payment is taken by credit card . Therefore , the question who will pay the service tax becomes important.Fortunately ,the Service Tax Act has express provision u/s 66A of Chapter V of Finance Act 1994 to deal with such situation.The excerpt of the said section is :
Careful consideration of aforesaid provision makes it clear that the Indians who are utilising the AdWords for their business and not for personal use and are buying the service of AdWords as well as other types of advertisement from Google ,USA are liable to pay service tax themselves despite the fact that Google has presence in India. The reason is that section 66A(2) and the last proviso of section 66A(1) makes it clear that even if the Google has office in India, if the service is provided from USA , the Google USA shall be taken as separate person and there will no effect of Google having office in India.
- service provider is based in foreign country , and
- it gives any service which is taxable service under service Tax laws and
- the recipient of taxable service is based in India
In this regard, it is interesting to know that Google has a permanent establishment in India.However, the AdWords or other advertisement program are run by Google ,USA and not its Indian office.The payment is taken by credit card . Therefore , the question who will pay the service tax becomes important.Fortunately ,the Service Tax Act has express provision u/s 66A of Chapter V of Finance Act 1994 to deal with such situation.The excerpt of the said section is :
66A. (1) Where any service specified in clause (105) of section 65 is,รข€”
(a) provided or to be provided by a person who has established a business or has a fixed establishment from which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India, and
(b) received by a person (hereinafter referred to as the recipient) who has his place of business, fixed establishment, permanent address or usual place of residence, in India, such service shall, for the purposes of this section, be taxable service, and such taxable service shall be treated as if the recipient had himself provided the service in India, and accordingly all the provisions of this Chapter shall apply:
Provided that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub-section shall not apply:
Provided further that where the provider of the service has his business establishment both in that country and elsewhere, the country, where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country from which the service is provided or to be provided.
(2) Where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate persons for the purposes of this section.
Careful consideration of aforesaid provision makes it clear that the Indians who are utilising the AdWords for their business and not for personal use and are buying the service of AdWords as well as other types of advertisement from Google ,USA are liable to pay service tax themselves despite the fact that Google has presence in India. The reason is that section 66A(2) and the last proviso of section 66A(1) makes it clear that even if the Google has office in India, if the service is provided from USA , the Google USA shall be taken as separate person and there will no effect of Google having office in India.
