A private limited company (Website Publisher/Advertiser) resident in India deals with Google Ad sense. Google Ad Sense is a simple way for website publishers to earn money by displaying targeted Google ads on their websites. Ad Sense also lets you provide Google search to your site users, while earning money by displaying Google ads on the search results pages. Basically, Ad Sense is an ad serving application run by Google Inc (USA).
How it Works?
These advertisements are administered by Google and generate revenue on per-click basis. Google is paid by advertiser based on click. Google is rendering service to its client based on the event of a click taking place. They are paying us a share or commission for a click that takes place through our website.
Google will not reveal how much you are earning for each ad that is clicked from your site, but can view the total amount of revenue you've generated that day, week, month, year, etc. in the reports. For example, if you see that you've made $12.60 today from 9 clicks then you can calculate that your average click-thru commission was $1.40 per click. That's as detailed as their stats will get. Also remember, that's only an average. You won't know how much each specific ad has brought in.
Thus, the Ad clicks, impressions and revenue are tracked directly by Google and payment is made by Google directly. Google will pay us our earnings after retaining their share. Publishers do not have any control over the price to be charged. Google withholds payment until an account reaches US$100. Google issues cheques in Indian Rupees approximately 30 days after the end of each calendar month if we have earned US $100 or more. If earned under that, the balance is rolled over to the next month.
Queries
1. How to account revenue as per accrual basis? Do we have to recognise income when it crosses the threshold limit of USD 100 set by Google or do we have to account every click as per their reports? Rate of USD conversion? Note that the cheques are issued in INR but reports generated by Google are in US$.
2. If earnings cross INR10 lakhs from Google Ad sense then should we pay service tax on Google Ad sense earning? Note that firstly we don’t generate invoice on Google? Secondly, earnings are finalised by Google.
1. You need to follow mercantile system of accounting in case of pvt ltd company. You can book your revenues initially on a monthly basis if volume is low or on daily basis if volume is high.
2. In the second query, assuming the google ad sense is a foreign company, your service will fall under export of service and you need not pay any service tax on the same so far as you are receiving your consideration in convertible foreign exchange.
Further, i would like to add that Google issues cheque in INR and amount is not received in convertible foreign exchange. Want to know ST impact on the company?
To Claim exemption from service tax in case of export of services, amount should be received in convertible foreign exchange. If the amount is not received in foreign exchange, service tax will be payable.
04 January 2011
Amit what category under service tax will this fall into. Also this is a service provided to an intermediary and not a final customer and will service tax be applicable. Will the service be deemed to have rendered in India.
I think the best possible category will be Advertising Time or Space Service as the person is providing Google a space on his website for displaying of some advertisements.
A second view can also be taken as google clarifies that google ad sense payments are commission from google from its advertising revenues. In that case it may be taken in Business Auxiliary Services.
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