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
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.
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