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Google Adwords Advertisers Not to Pay Service Tax

Google Adwords team has initiated that wef 01 July 2012, the advertisers need not pay service tax for the amount being paid by them for the online advertisement and same is courtesy 17 new services being placed in the negative list in the Finance Act. It appears that govt is trying to give fillip to business by making people more amenable to online advt. Have a look at the press release sent by Google Adwords team to its clients and same is as appended below:

Dear Advertiser,

Due to a recent change in Indian tax regulations, the service tax rate for advertising services supplied by Google India Private Limited will change. The rate will be reduced from the current rate of 12.36% to 0% (zero percent). Given that Education Cess and Secondary & Higher Education Cess are calculated as a percentage of the service tax, we will also no longer charge these taxes. This change will take effect for all AdWords invoices dated on or after July 1, 2012.

Please note that Google cannot advise you on tax matters and recommend that you contact your tax adviser for any questions regarding this change.

The tax exemption details (negative list) can be found in the Finance Act, 2012 (Clause 143). In particular, the 17 services that comprise the negative list can be found at Section 66D. The sale of advertising space or time slots is included under (G) Section 66D. Notification No 19/2012-Service Tax appoints the 1st day of July, 2012 as the date from which the provisions of clauses (C), (F), (G) and (I) of the Finance Act, 2012 (Act No 23 of 2012) shall come into effect.

This service announcement is sent to all our Indian customers (active as well as inactive) and does not affect your account status or activity.

The Google AdWords team

You've received this mandatory email service announcement to update you about important changes to your AdWords account.

© 2012 Google India Private Limited, No. 3, RMZ Infinity - Tower E, Old Madras Road, Bangalore, India 560 016

However we wonder that such a step has not been taken by Microsoft for its Bing advertisement as they are also equally affected by the said amendment in the act. You can check the services on which service tax is not applicable in India as per latest amendments effective wef 01 July 2012. Lastly you can check Service Tax calculation formula as now you will have to pay service tax on the amount for which Google has been exempted for payment. It appears Google and Microsoft remains the major beneficiary for service tax payment but it may not make a difference as the service tax was recovered by them from the client itself.

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