Thursday, 7 November 2019


GST impact on the Landscape of Digital Marketing Sector
A GST i.e. Goods and Service Tax, a new tax structure introduced in India from 1st July 2017. under this India is starting a new journey to much talked one nation one tax system. GST is the single value-added tax across the nation applied on goods and services. Economy experts are saying that it is a radical change by which service sectors, businesses, enterprises, and consumers will be taxed. It is one of the biggest reforms in economy done so far by Mr. Narendera Modi’s government.
GST impact on sales and marketing is the most notable and protuberant change for which Indian economy is waiting since the year 2000. Economy experts are postulating that GST will have or play a critical role in improvising the reliability, timeline, and transparency across industries. But still some sectors are unaware and need an answer for how they will be impacted and what pros and cons it will bring to them, a digital marketing sector is one of them. Let’s see how GST and Digital Services will go:
1. Advertising Agencies – Losers or Gainers?
As the service tax is increased from 15% to 18% and digital marketing companies comes under service industry and operates in multiple states, so GST will definitely take them to a difficult situation as now they need to charge SGST / CGST / IGST depending upon the base/state of the client. They need to work on the differential increase of 3% i.e. where to adjust this. Whether they should get it recovered from the clients by increasing the prices or they should get it adjusted from lowering their production. But one thing is confirmed that every organization or brands will not change their budgets for advertising. At the initial level, they may feel issues but gradually it will get sorted out.
2. Cost of Digital Marketing
It is very important to remember and note that the Google tax or equalization levy in the direction of foreign digital MNCs like Twitter, Yahoo, Google or Facebook, from 1st June 2017 will also have an impact. This may increase the costs of advertising companies in India as it will be charged for the digital services offered by the companies i.e. online sale, television and radio advertising, blogs, emails, websites, the creation of websites, hosting of websites, online payment collection and social media marketing on social platforms as well.
3. Initial Teething Troubles
In the start, for 2-3 months, this new change and reform will bring initial hiccups from the implementation perspective. Although, big brands or companies may have already worked on the solution part of GST but smaller brands will watch the trend for some time to get it implemented which may incur some loss to them in the starting period.
4. Increased Service Tax
As we stated earlier, service tax is increased to 3%, this will not majorly impact the advertising expenditures of any organization as input credit will be available now in the tax system.
5. Spend on Advertising
Advertising spends will increase as advertising cost will decrease.
6. Input Credit
As of now, no input credit is available for digital marketing companies in advertising as it comes under the purview of manufacturing expenses which is subjected to VAT and sales tax because of which sometimes huge loss is incurred. But after GST implementation, expenses on advertising will get the input credit of 18% on taxes which in turn will cut this loss.
In conclusion, any new change will bring some tension at the start but GST is a big change which will gradually not only benefit the Indian economy but all industries as well.

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