Online advertisement expenditure on social media platforms such as Facebook and Google has been witnessing a phenomenal rise in the last couple of years. This year it has witnessed almost 60% jump, as per income tax official.
Indian tax department collected about Rs 939 crore from digital advertising platforms in the year ending March. Last year the collection figure was around Rs 590 crore.
The incremental tax collection suggests that Indian firms paid digital platforms about Rs 15,650 crore in comparison to Rs 9800 crore in the previous year.
The actual spending number is said to be more as the ad firms deduct the levy at source and deposit it with the Indian government on behalf of the offshore digital corporation only if the advertiser has spent more than Rs 1 lakh on advertising on overseas platforms in the previous year, said a Mint report.
GST is applicable at 18% and TDS at 2% irrespective of whether the entities are advertising through the Google entity located outside India
For company outside India, they are also liable to pay equalisation levy, which was introduced first in 2016, at 6%.
Currently, a tiny part of —online advertisements is taxed under the equalisation levy. Encouraged by the growth trend, Indian govt may expand the scope of the levy to other services.
There is a massive potential for further growth in the digital economy as well as tax revenue from this sector, said Girish Vanvari, founder of advisory firm Transaction Square.
The rise in the digital advertisement has primarily been led by significant growth in internet usage and the wide availability of smartphones.
As per advertising buyer Magna, Facebook and Google between them claim 68 per cent of India’s digital ad market last year.
Over the years, Amazon also has emerged as an entity with a high margin digital advertising business, close to $100 Mn in India.
In India, it pegged the overall advertising market close to Rs 68K crore.