What impact GST can lay on the Digital Marketing Industry
The Goods and Service Tax (GST) replaced multiple taxes levied by governments in central and state. Though it was included in the constitution in ACT 2017 as an amendment Bill. The chairman entitled is the Finance Minister of India and the maintenance is done by the GST Council. It has been implemented in India from June 1st, 2017. It is obvious that this will affect all the industries and online or digital marketing is no exception. So let's consider this arena, whether it enjoys the benefits or have to face some downs too.
Previously, advertisement or promoting online is categorized under the manufacturing expense that is eligible for VAT and sales tax. So, there is no input credit and advertisers suffered great losses. Whereas after implementation of the GST, the amount invested on advertisements will be liable for an input credit of 18% for the tax levied for ads. And it's a great impetus for the advertisers to reduce the sum losses.
Promotional or Advertising Investment:
GST is basically a tax that applies on value addition at every stage. A consolidated GST is chargeable for the supply chain which should extenuate the following impact of the levy and in order reduce the amount incurred in making an ad.
The services tax levied is decided to be at 18%, which is 3% more than the present tax percentage paid by the industry before GST. Few in the industry might see the increase as a trouble while if you see the input credit percentage it's not going to effect the advertising spends so much.
As in the case of any new improvement or reform, industries and individuals have to deal with some problems through the initial period like for 3-4 months. But in the case of huge brands, they may have prepared for the new system of Tax, smaller companies may choose to wait and watch the influence of GST and plan accordingly.
It is a significant factor to account the equalization tax or 'Google Tax' imposed for foreign multinational digital companies such as Facebook, Twitter, Google, Bing, Yahoo and others. The GST tax imposition may increase the costs for advertisers in the country, with digital enterprises to come under the category. For the even levy of the tax, services provided digitally may be made chargeable in the coming time. Like, online accumulation of payments, web hosting, design and development of websites, emails, blogs ranging to TV and radio advertising. Not only that, the online sale of products and services, online song and movie downloads, apps, games, books and even online reading of news. This can affect the companies that provide hosting, email and advertising facilities online.
Now, coming onto the social media marketing, Facebook has already announced that every advertiser in India, it's a mandate to update the Facebook's ad account with GST the registration number for continuing the ad display facilities on Facebook. Though no GST is levied on Facebook ads. And for the rest of the platforms, it will be wise to keep a check on the prices and rule or policy amendment they do in order to get unhindered services.