Service tax on Domain and Hosting

Service Tax on Domain Registration and Renewals …. Ouch…

In domain and hosting Industry this question comes every now and then to me, Panic, Confusion.. grrrr…

There is always a lot of confusion on Service Tax on Domain Name Registration and Renewals. Let me take few questions one by one.

– Whether Service Tax is applicable on Domain and Hosting or not ?

Till July, 2012 there was a confusion over Service Tax on domain names, But after Introduction of Negative List in Service Tax, doesn’t left any window on this. Service Tax is applicable on both Domain and Hosting.Ref : Taxguru.in

– My turnover is less than 10 Lakh Rs. so it is not applicable for me.

Yes and No, Confused ?

Biggest confusion on this particular point. As per law, if your turnover is less than 10 Lakh Rs. you may need not to charge Service Tax to your clients But what about your purchase ? Please refer this AD from Service Tax Department Dt. 7th Nov, 2013 in Hindustan Times Page No. 9

Service-Tax

So what this says ? This means even if your turnover is less than 10 Lakh Rs. but if you BUYING your DOMAIN or HOSTING from a NON INDIAN Company, you have to pay Service Tax on your purchase as same is import of service and on import of services Service receive needs to pay service tax instead of Service Provider.

Most Domain and Hosting providers in India are buying domains from foreign companies ( Godaddy, Hostgator, Bluehost, Enom, Rclub, Tucows, Network Solutions etc ). So even if your turnover is 2 Lakh Rs., but you making a purchase from a foreign provider of say Rs. 1 Lakh, you have to pay Service Tax on that purchase.

– I pay in INR in Indian bank a/c and my provider is not charging Service Tax
Verify the billing address of your provider, as foreign companies have facility to have Indian Bank a/c and on such purchase also you need to pay service tax.

– Ok, If I am paying on my purchase, that is additional cost on me ?
No, You can take setoff against sales invoice you make. e.g.

Case 1. I am buying from Indian Company, who charge me ST

Scenario 1. My turnover is less than 10 Lakh.Nothing to do, ENJOY

Scenario 2. My turnover is more than 10 Lakh. You need to charge ST to your customer, but you can have set-off from your purchase in following manner :

Purchase made :: 1,00,000 Rs.

ST Charged on Purchase :: 12,360 Rs.

Total Purchase Bill :: 1,12,360

Sales Made :: 1,50,000 Rs.

ST Charged on Sale :: 18,540 Rs.

Total Sale Bill :: 1,68,540 Rs.

Net ST Payable by you :: 18,540 – 12,360 = 6,180 Rs.

Margin :: 50,000

Case 2. I am buying from foreign Company, who doesn’t charge me ST

Scenario 1. My turnover is less than 10 Lakh.

Purchase made :: 1,00,000 Rs.

ST to pay on Purchase :: 12,360 Rs.

Sales Made :: 1,50,000 Rs.

Net ST Payable by you :: 12,360

Margin :: 37,360

Scenario 2. My turnover is more than 10 Lakh.

Purchase made :: 1,00,000 Rs.

ST to pay on Purchase  :: 12,360 Rs.

Sales Made :: 1,50,000 Rs.

ST Charged on Sale :: 18,540 Rs.

Total Sale Bill :: 1,68,540 Rs.

Net ST Payable by you :: 12,360 + 18,540 – Set-off 12,360 = 18,540

Margin :: 50,000

Important :: You will get set-off only if your provider mention Service Tax separately on Invoice / receipt. There are few providers who don’t show Service Tax amount in Invoice, you will not get any set-off for that.

What I can conclude, You should charge Service Tax on domain and Hosting if serving in India, and if your turnover is less than 10 Lakh, better to take from Indian Provider only who charge you service tax on Invoice.

Article Courtesy  :: Sandeep Kanoi, TaxGuru.in

Disclaimer :: Article is based on personal research and inputs from few tax advisers. For actual slabs and charges please contact your CA.

23 Comments on this post

  • paragguptaclasses

    July 28, 2018 at 12:33 pm
    Nice Post, Thanks For This Information
    Reply

  • abhikbose

    February 3, 2017 at 2:07 am
    I've just started a web hosting company. I've purchased quite big Dedicated server from USA, and I didn't paid any service tax during purchase. I'm selling shared hosting on this server in India. In this year the server didn't got filled. So, if I pay 15% on the purchase price tax will be higher than 15% of total turnover ( i.e. my business is running in loss for this year). What shall I do? If I charge clients with 15% ST and pay that only, will it be OK? My turnover is less than 10 lkh this year. Thanks in advance.
    Reply

  • Urjita

    February 26, 2016 at 11:13 am
    Hi, I have bought wix domain hosting and website builder package for say INR 2000 for a client. Wix has not charged any ST and they are a foreign company. Now after Designing the website I charge INR 7500 to my client. From above discussion I understand that I have to pay ST on INR2000. But do I show this ST in my invoice to my client since the website is his? My turnover is less than 10lacs. Also, for domain registeration I have used a discount coupon and hence the net price on invoice by Wix is INR 0 (charge INR 800- coupon INR 800). In this case do I have to pay service tax?
    Reply

    • Vinay

      February 27, 2016 at 7:09 am
      When there is NO Payment, No service tax. Technically on your purchase from foreign provider as a firm / company you need to pay service tax. Better to take a final view of your CA.

  • D.Antony

    November 15, 2015 at 5:47 am
    What is the classification of service for the assessee for commission paid to Elance under reverse charge method
    Reply

  • Milan Pitroda

    August 22, 2015 at 1:40 pm
    Hello I need to know As i am purchased the Dedicated server form a USA company & they dont have any bank account in india . nor any representative in India . Do I need to pay Service tax for the same .As i am paying them through payment gateway .
    Reply

    • Vinay

      August 22, 2015 at 11:20 pm
      If you are a Company ( Proprietor / Pvt. Ltd. / LLP / Partnership ) , then YES, you need to pay Service Tax under reverse tax mechanism for Import of Services for server payments, whatever payment method you use that doesn't matter.

    • Kumar

      November 5, 2015 at 6:45 pm
      Same case with me. Buying Hostings and Domains from US companies but I am working as freelancer not having any registration. What should I do? Thanks in advace

    • Vinay

      November 5, 2015 at 7:33 pm
      As mentioned, you need to pay on your Purchase. Its your choice if you want to legalize your business or not.

  • Rajesh

    March 30, 2015 at 12:27 pm
    My name rajesh, i from chennai, i am having business web hosting and most of selling dedicated server. this year cross 10lkh from 1st april i am apply for services tax no. dedicate server taking in rent with paying service tax to indian company, and i am again selling in rent in U.S.A, then i have to charge services tax to my client ?
    Reply

    • Vinay

      March 30, 2015 at 1:01 pm
      1. If you BUYING even of Rs. 1 from out side of India, you have to pay service tax on your PURCHASE as IMPORT of SERVICES ( even if your turnover is less then 10 Lakh, this is applicable ) 2. You need to charge Service tax to your customers from India ( 10 lakh limit is optional , in hosting industry where you buying from foreign companies, it is better to charge ST irrespective of any turnover to get setoff of INPUT service tax ) 3. Even if you paying in INR to companies like Godaddy, ENOM, Resellerclub, who bill from outside India, you need to pay Service tax on PURCHASE.

  • Rajesh

    January 16, 2015 at 12:40 pm
    Thanks for the information's. Please let us know about TDS also. Any TDS to be paid while making payment to Godaddy / softlayer [ for buying dedicated server ] ? . since they don't have Indian pan numbers , whether the buyer to pay TDS from his pocket ? buyer not operate or had no physical access only using services [just accessing/using the server through internet], in this case TDS applicable ? Please clarify.
    Reply

    • Vinay

      January 16, 2015 at 4:40 pm
      Yes. Buyer need to Pay TDS. You can ask respective company for same details. Also you need to have TRC Certificate for tax verification purpose from the vendor.

  • Rajesh

    January 16, 2015 at 12:31 pm
    thanks for the informarions, please let us know about TDS also, any TDS applicable if we purchase from domain / dedicated server from resellerclub / godaddy / softlayer etc....
    Reply

  • Gagan Gagan

    December 25, 2014 at 1:31 pm
    Dea Vinay , My scenario is i have a turnover more then 10 Lkh and have service tax no. I am buying Domains and renewed it from Reseller Club - India but the cheque are issued is in the name of P.D.R Solutions FZC UAE . ( Bank - ICICI- PDR 001105022959 ) Reseller Club India only provides / issue online receipt and no where they mentioned SERVICE TAX . Q1. Do i have to calculate service tax on Purchase from ResellerClub and deposit it without taking any set off . Q2. Is Service Tax is not applicable if payment is made on UAE . Kindly explain With Regards Gagan 25/12/2014
    Reply

    • Vinay

      December 25, 2014 at 8:02 pm
      1. You need to pay Service tax on all payments made to Resellerclub, and in next cycle you can take set off of this. 2. Service tax is applicable on any payment made to any company having billing address outside India ( as Input service tax on purchase )

  • Puspa Khatri

    August 7, 2014 at 10:29 pm
    Hello, I am from NEPAL and want to buy dedicated web hosting server from Indian web hosting server provider. So on this case do i have to pay service tax 12.36% extra or not? please help me on this issue as i am planning to buy it asap. thanks Puspa
    Reply

  • Anuj

    July 15, 2014 at 12:38 pm
    Vinay, Thanks for this insightful post. Currently, i am renting Virtual Servers from Digital Ocean. I have my software running on them ( developed by me ). I charge people for using this service via Paypal. My clients are all non-residents. ( US,UK,NL ).Occasionally, i need to hire workers based in China for data entry job. So, i need to remit their payment too. Is service tax or tds applicable on that ?
    Reply

    • Vinay

      July 16, 2014 at 7:38 am
      You need to pay ST on your PURCHASE of servers and domains ( there are many companies, who having Indian bank a/c and you paying there, that doesn't means they are Indian company, you need to have Purchase Invoice with ST ) . Domain payments also attract 10% TDS.

  • Bipin Tripathi

    April 12, 2014 at 12:54 pm
    Can anyone explains me the law of service tax under this situation. I have a registered prop. company of "domain names trading" for which I am buying/register domains from Godaddy.com (US Server) and sell domains to: 1. Foreign Friend. 2. Indian Friend (Individuals) What is the tax liability to my prop. company? Please help. Thanks
    Reply

    • Vinay

      April 12, 2014 at 2:48 pm
      As you are Indian company, following is process for tax >> 1. As you pay to godaddy / resellerclub , whatever amount you pay them, you need to pay service tax on that to ST department @ 12.36% 2. Now if you selling to Indian customers and your turnover is more then 10 Lakh PA, you need to charge them ST, though you can have setoff of ST you paid on purchase Even if your turnover is less then 10 Lakh rs., you have to pay service tax on your purchase from foreign providers on entire amount. Case 2 >> If you buying from INDIAN company, and your turnover is less then 10 Lakh rs, BE FREE, nothing needed from your end. Case 3 >> If you buying from INDIAN company, and your turnover is more then 10 Lakh rs, you need to charge ST to all your INDIAN clients, BUT you can have SETOFF of ST charged by your INDIAN provider. ( Virtually you have to pay very less amount ), only you need to show entry in your returns.

    • Vinay

      April 13, 2014 at 7:10 pm
      IMPORTANT :: Foreign Income is considered only if you are receiving money in USD in your bank a/c from a foreign bank a/c.

  • Bipin Tripathi

    April 12, 2014 at 12:51 pm
    Thanks for info, I studied, please let me know what in case: If I buy domain from Godaddy.com(US Server) and sell domain to a foreign friend.?
    Reply

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