19Jul

Impact of GST in Digital Marketing Sector

Brightbridge_admin Business 2157

GST commonly known as Goods and Services Tax has been on the stage from 1st July 2017. GST is a single tax structured for uniformity of tax rates. It was proposed as The Constitution (One Hundred and First Amendment) Act 2017, following the passage of Constitution 122nd Amendment Bill. Before diving into the purpose of the article let’s know few pieces of information about it.

The GST has been divided into two categories, that is the tax to be implied on the Intra-state movement of goods and Inter-state movement of goods. There are 3 types of tax system implemented by the government of India:

  • SGST (State GST)
  • CGST (Central GST)
  • IGST (Integrated GST)

SGST (State) and CGST (Central) comes under the Intra-state movement of goods. whereas, IGST (Integrated GST) falls under the Inter-state movement of goods category. Furthermore, the GST Council has proposed and announced five tax slots under it:

  • 0%
  • 5%
  • 12%
  • 18%
  • 28% (Source Clear Tax)

Here comes the question how GST impacts the digital industry. Advertising industry falls under the services industry and the service tax is increased from 15% to 18%. Hence digital marketing companies operating in multiple states have to now charge SGST/CGST/IGST based on their client’s state. They have to adjust the 3% differential increase according to their own business strategies.

At the initial stage, the industries may face some teething problems but later they will find ways to cope with it. There will not be a major impact on advertising costs of any organization as INPUT CREDIT is available in the GST system. Therefore this 3% increase will not pose a significant impact in the digital marketing sector. Due to the input credit system, the advertising cost will come down and companies will eventually spend more on their advertisement. As in the previous tax system, no input credit was available to the advertisers.

The benefit that companies would be gaining from the input credit system, most companies will find it suitable to invest in paid ads in the Digital field. Internet penetration and digital India are the icings on the cake for those in the Digital Marketing field.

Most agencies are confused how Google will be charging for Adwords & Facebook on FB ads. The forecasts of the experts for digital marketing industry will take the time to show results. At last to say-Time is the wisest counselor of all.