GST on YouTube Income in India

Common Sources of YouTube Income

YouTube income doesn't just come from one stream. Most creators have multiple sources of income, and they all count as part of your total taxable income. All of these sources of income are taxable. If you are registered for GST and exceed the turnover threshold, some of these sources may also be GST applicable on top of income tax.  

Here are the most common sources of YouTube income:

1. YouTube Ad Revenue:
   1. The revenue paid to you from ads performed on your videos as part of the YouTube Partner Program. This amount is dependent on several factors, such as ad type, viewer engagement and video views.

1. Affiliate Marketing & Sponsorships: 
   1. Income from product or service promotion. For example, a company may pay you to review their gadget, or you may make commission when your viewers buy using your affiliate link.

1. Partner Payments: 
   1. Additional payments from YouTube. Some of these payments could be considered partner payments and may be linked to performance indicators like video watch time, like engagement, comment engagement, or subscriber achievement levels.

1. Freelancing & Consultancy: 
   1. Most successful YouTubers monetise their experience outside of the platform by offering services like content strategy, video editing, training workshops, or business consultancy services.

Income Tax on Income from YouTube

When you earn money from YouTube, the Income Tax Department treats it like your income. You need to report it and if you are above the exemption limit you need to pay taxes on it. For many creators, YouTube income is their main source of income, and if it is your main source of income, it is classified as business income for tax purposes and there are some unique rules about business income.

1. Taxed at slab rates

The income you have derived from YouTube is included in your total income for the financial year, and once you determine your total income you are taxed according to the applicable income tax slabs, based on your total income.

For example, if you have total yearly income for the year of Rs.7 lakh, you might qualify for the rebate under section 87A, and if you have total yearly income of Rs.15 lakh you are now taxable at the highest slab where a higher tax percentage applies. In other words, the greater your income, the more tax you pay, and at increasing percentages. Thus, the more you earn, the higher the percentage of tax you pay.

1. Tax Audit under Section 44AB

If your turnover (the total revenue from all your activities related to YouTube) exceeds a specific limit specified in law, you may need a tax audit under Section 44AB. A tax audit is a review of your accounts conducted by a Chartered Accountant (CA) to verify that the accounts are accurate and comply with the tax rules. A tax audit is important for ensuring correct reporting and preventing any under-declaration of income.

How to Claim a Deduction for Business Expenses as a YouTuber?

As a good part, you will get the benefit as a creator to deduct expenses that you incurred to run your YouTube business. Therefore, it will consequently reduce your taxable income. Examples of deductible expenses include:

1. Purchase of a camera, microphone, and lighting equipment;

1. Subscription to editing software;

1. Internet and electricity bills related to content creation;

1. Rent on the studio or office, where videos are recorded;

1. Professional fees paid to editors, designers, or consultants.

For example, if you had total revenue of Rs.12 lakh in a year and incurred Rs.3 lakh in equipment and production expenses, you would only pay taxes on Rs.9 lakh (net of deductions).

GST on YouTube and Blogging Services

YouTubers and bloggers are defined as providers of services in the Goods and Services Tax (GST) system. To simplify, when you generate money from your videos, through an advertisement, or via sponsorship arrangements with a brand, it qualifies as a "supply" of services. The law states that a supply is any acquisition of goods or services made for consideration in the course of business. Thus, all of the revenue that you are deriving from content creation and distribution online, is considered a service under the GST framework.

For bloggers, their services are known as Online Information and Database Access or Retrieval (OIDAR) services. An OIDAR service is one which is supplied over the internet or an electronic network and includes facilitating online advertising. An OIDAR service is principally automated, requires little human intervention, and is dependently delivered in whole, through technology. These services would simply not be delivered without the internet or digital devices.

GST Registration Guidelines

It is essential for creators to understand the GST registration thresholds:

1. Normal States: The requirement for registration is if turnover is above Rs.20 lakh in any financial year.

1. Special Category States: Rs.10 lakh.

If your turnover is below the limits above, you MUST register for GST if you provide interstate services (i.e. providing services to a client or platform in a state other than your own).

For example, if you are a Hyderabad blogger who displays advertisements for an ad agency based out of Bangalore, you would be required to register for GST even if your turnover was less than Rs.20 lakh.

Creators have the option of flexible compliance:

1. Composition Scheme: Service providers with turnover up to Rs.50 lakh can choose this scheme which gives them simpler tax calculation and return filing.

1. QRMP Scheme (Quarterly Return filing and Monthly Payment of taxes): this would simply decrease the burden on creator's administration, if they did not want to select the composition scheme.

Export of Services and Zero-Rated Supply

A sizable portion of many YouTubers' and bloggers' income is derived from platforms located outside India, such as Google AdSense or YouTube. If you are being paid for your blog videos on any of these foreign platforms, your income may be characterized as an export of services under GST.

In order for your income to be considered an export of services, you must meet a few conditions:

1. Supplier located in India: You, the YouTuber or blogger, must be located in India.

1. Recipient located outside India: The company that is paying you, like Google or YouTube, must be located outside India.

1. Payment made in foreign currency: You must be paid in a currency that is a recognised convertible foreign currency, such as USD.

1. Independent entities: The supplier (you) and the recipient (Google/YouTube) are not two establishments of the same person.

If all four of the conditions are satisfied, your services are considered to be a zero-rated supply under GST.

A zero-rated supply gives you compliance options in two ways:

1. Export under a Letter of Undertaking (LUT): In this case, you do not pay GST on your services at all. You only tell the GST authorities that you are exporting these services by filing under an LUT.

1. Pay GST first and then claim that amount back: As an alternative, you can pay GST on your foreign earnings upfront and then claim that amount back. While this avenue has slightly increased compliance, it still means you are not taxed on your exports.

Example for YouTubers

An example might be a YouTuber in Delhi earns Rs.8 lakh a year from Google Ad Sense, and that payment is credited in USD to an Indian bank account. Since Google (the payor) is outside of India and the payment is made in foreign currency, this clearly qualifies as an export of services. The creator is free to export under an LUT and pay no GST or pay GST upfront and claim the same amount back at a later date. 

Example for Bloggers

A food blogger in Bangalore might earn Rs.4 lakh a year for hosting Ad Sense ads on their recipe blog. Since the ads are placed by Google (overseas) and the payment is made in foreign currency it also qualifies as an export of services. The blogger is therefore in the same situation as the YouTuber; they can export under the LUT and pay no GST or pay GST on the income upfront and claim it back at a later date.

GST Rates

For registered YouTubers and bloggers, the applicable tax rate on their service is 18% in total. This is broken down in the following manner:

When services are provided in the same state:

1. 9% CGST (Central Goods and Services Tax)

1. 9% SGST (State Goods and Services Tax)

When services are provided in different states (inter-state):

1. 18% IGST (Integrated Goods and Services Tax)

In the case of an export of services (such as payments to you from Google AdSense in foreign currency), this supply is treated as zero-rated, which means the following two options exist:

1. If you export services under a Letter of Undertaking (LUT), no GST is charged.

1. Or you can pay GST first and later apply for a refund, resulting in no actual tax to bear.

It is important to recognize this distinction to ensure that creators who earn mostly from international platforms are not unjustly taxed for money that would otherwise qualify as foreign export income.

GST Compliance for Youtubers

After registering under GST, you must follow some guidelines to ensure compliance. These guidelines will keep your channel from being seen as a hobby while avoiding penalties down the road.

1. GST-Specific Invoice

Regardless of mostly being compensated through Google AdSense or sponsorships from brands, the requirement to issue invoices still exists. For example, if you had collaborated with an Indian brand for paid promotion, you would have to issue a GST invoice providing the considered value of your services plus 18% GST on the value.

The invoice must include, at a minimum, the invoice number, date of invoice, your GST Registration Number, details of the brand, service description, and the applicable GST.

If you received a payment from Google AdSense (an overseas entity), you would not be required to charge GST if the payment is treated as an export of services, which is a zero-rate supply.

 2. Filing GST Returns

 You must file:

1. GSTR-1: which provides the details for the outward supplies, i.e.: invoices you have issued to brands and clients

1. GSTR-3B: is a summary return that you file and that includes the total sales, GST that is payable, and GST paid.

If you are a YouTuber and your turnover is below Rs.5 crores, you can choose the QRMP scheme, which allows you to file quarterly while making your tax payments monthly.

3. Claiming Input Tax Credit (ITC)

One of the greatest advantages of becoming a GST registered YouTuber is the ability to claim Input Tax Credit (ITC). This allows you to set off the GST paid on expenses against the GST you collect on your service fees. This will ease your overall GST liability and lower the expenses of running your channel.

Some examples include:

1. GST on the purchase of cameras, microphones or lighting equipment

1. GST on your subscription to editing software

1. GST expenses on your internet bills or studio rents

4. Record Keeping

You must maintain proper records of all invoices, contracts, payments and expenses for a minimum of 6 years. This is critical if the GST department requests verification or conducts an audit.

5. Compliance Advantages

When you comply with GST rules, YouTubers enjoy:

1. No penalties or fees for late payment

1. Credibility with brands (many prefer to work with GST registered creators)

1. The ability to claim any refund on export income from AdSense (income in foreign currency)

1. Tax savings from ITC

For illustration:

A YouTuber in Mumbai performs a paid promotion on behalf of an Indian tech brand valued at Rs.1 lakh. The YouTuber issues an invoice charging 18% GST for a total of Rs.18,000.

At the same time, the YouTuber purchases new lighting equipment from a local supplier worth Rs.50,000 and pays Rs.9,000 GST on that equipment. Using the input tax credit, the YouTuber can offset the Rs.9,000 GST from the Rs.18,000 GST payable, therefore they only pay the residual Rs.9,000 GST to the GST department.