GST Implication for India

[LearnAnywhe151]

** This is only applicable to India based instructors***

Hi Team,

I couldn't find relevant forum topic, so posting under this. 

As per Indian law, Udemy deduct 18% GST from Indian student and rest is shared as per revenue model.

Now as per Indian law, as sell of udemy course comes under eCommerce category and we are suppose to pay GST for all Indian students (not applicable to student from other countries) enrollment (money collected), now there are 2 ways to pay up.

- Pay 18% on you income.

- Show proof that Udemy has already collected and paid that amount to Indian government, so we don't have to pay. 

Now second point sounds more logical, as Udemy has already paid tax and I wouldn't want to pay the same tax again from my pocket.

But...

Indian authorities needs proof of tax collected by Udemy (and paid to Indian government), but I dont see that the doc is available directly to us. and I have raised a ticket but I think it will go in longer loop.

So is there anyone who can guide us on how to get the GST document from Udemy? 

@Mods this is not tax advisory, this is standard doc which we need from Udemy to show it our tax authorities.

[LearnAnywhe151]

For the update, didnt get anything other than template replies from Udemy.

My CA just sent me the 26AS doc and it shows 1% TDS deducted and submitted to Indian IT department for my total income, so they are submitting TDS even when we sell courses to non-indian students. We are not sure, where it leave is with tax submission point of view.

cc @Alfa-eLearning @Rahul Iyer @Salil Dhawan  Did you guys file the taxes for last FY (21-22) , any issues?

[drkrisharma]

Hi!

Any co-instructor here? I wish to know that if I add co-instructors in my courses to assist me, would Udemy deduct separate withholding and deposit TDS (Indian tax) for each co-instructor while doing payments, or it would deduct the whole withholding and deposit TDS under my name only and then distribute the shares to the co-instructors?

[CA_Abhishek]

Hi,

I'm CA Abhishek Jain, As far as I understood Udemy model after studying one of my clients file.. My understanding about Indian instructors is as follow.

1) Udemy is a US based Company and obey US tax laws.

2) Instructors (in this case - indian instructor) upload his/her course on Udemy portal and set the price. [Inclusive of TAX -(This tax is US tax & not Indian tax)]

3) Udemy manage to sell your courses to students all over the world and collect course charges suppose INR 500 (inclusive of tax eg. 75)

4) Out of balance 500-75, i.e. INR 425 (INR 75 Is a US GST/Sales tax also called as a indirect tax) Udemy gives you royalty in a particular %  of balance amount say 37%.

5) So your revenue point is this... I.e. when you earn 37% and not when Udemy sale course to students. 

6) So taxes applicable to you will start from this point. Taxes means GST, TDS and then Income Tax.

7) Udemy is US company so it collect US GST/sales tax from students to whome it sales course and pay to US govt. This tax has nothing to do with indian govt revenue.

😎Now it will give you 37% of income and will again deduct TDS as per applicable rates in US (for US Govt - also called as a Direct Tax) for this Udemy will provide you form 1042-S containing details of your income and tds deducted by them.

9) Now Udemy will remit this remaining income to your indian account and deduct indian TDS @ 1% and treat this income as a royalty payment to you.

10) so when Udemy will determine your 37% income, you should to book it as a your turnover and check if indian GST provisions (like registration, gst filings etc) are applicable to you or not and take necessary action accordingly.

12) further based on your turnover or income, more provisions like maintaining proper books of accounts, tax audit and filing of different tax forms will be applicable to you.

13) There is a large scope of tax planning. You should consult your CA or tax planning adviser before taking any decision or filing any returns. You can even claim all the tax deducted by Udemy as tax refund or adjust it from your total tax payable at the end of the year.

Thanks & Regards

CA Abhishek Jain 

caabhisheksjain@gmail.com

@LearnAnywhe151 @drkrisharma @Alfa-eLearning 

[LearnAnywhe151]

Thanks.

Quoting you.

7) Udemy is US company so it collect US GST/sales tax from students to whome it sales course and pay to US govt. This tax has nothing to do with indian govt revenue.

- Are you saying that Udemy collects 18% tax from Indian students and doesn't pay to Indian IT department?

9) Now Udemy will remit this remaining income to your indian account and deduct indian TDS @ 1% and treat this income as a royalty payment to you.

- Why it appears under 1940 ? which is ecommerce section? and tax implication are from first rupee earned.

[CA_Abhishek]

1) Are you saying that Udemy collects 18% tax from Indian students and doesn't pay to Indian IT department?

- No. Why Udemy collect GST on behalf of Indians? Udemy is a US based company, Udemy is not responsible for compliance w.r.t. indian gst is concerned. The case you mentioned are known as import of service by indian student from Udemy (US). Generally, the supplier of goods or services is liable to pay GST. However, in specified cases like imports and other notified supplies, the liability casts on the recipient under the reverse charge mechanism. However students being unregistered person and a end consumer, not liable for GST.

Consider it this way, suppose you sold service outside india eg. From Fiverr or other websites, do you pay taxes applicable to that other country? No, you just paid taxes applicable to you in your country. Same thing apply to Udemy. It will comply to tax provisions applicable to there country only. And from your income you have to comply to the provisions of your country only w.r.t. indirect tax is concerned.

9) Now Udemy will remit this remaining income to your indian account and deduct indian TDS @ 1% and treat this income as a royalty payment to you.

- Why it appears under 1940 ? which is ecommerce section? and tax implication are from first rupee earned.

Yes.. becouse Udemy is a e-commerce operator and you being a instructors are their participants. As per sec. 194O, E-Commerce operators should deduct TDS @1% at the time of credit of the amount of sale of goods, services, or both to the account of an e-commerce participant or at the time of making payment to an e-Commerce participant by any other mode, whichever is earlier, and hence Udemy is bound to deduct TDS @1% on the amount it credit to your account.

Hope this will clear all your doubts 🙂 

@LearnAnywhe151 @drkrisharma 

@Bella 

[Alfa-eLearning]

@CA_Abhishek 

"- No. Why Udemy collect GST on behalf of Indians? Udemy is a US based company, Udemy is not responsible for compliance w.r.t. indian gst is concerned." -

Why they are not responsible ? Check below screenshot where Indian student purchased course and 18% tax deducted. Isn't it GST ?

Not just India, I can see this kind of tax deductions for students from other countries as well. For Ex-

Below one is Mexico where it is 16% tax.

Below one is from UK where it is 20% tax.

If they are following just US tax then the tax rate should be same for all these purchases but that's not case here.

With Udemy we are NOT collecting money directly from buyers(students) and we are NOT issuing any invoice. Now let's say if I sell my courses directly to Indian students using my own website then I think I have to deduct & submit 18% GST to Indian government.

"Consider it this way, suppose you sold service outside india eg. From Fiverr or other websites, do you pay taxes applicable to that other country? No, you just paid taxes applicable to you in your country." - 

With Udemy we pay US withholding tax for all purchases from US students @ 15% rate. Same Youtube does for the earnings from US. Also Fiverr & Freelancing websites etc are NOT royalty income but here on Udemy it is royalty income.

@Bella Can you pls help in confirming if Udemy deducts 18% GST for Indian Students ?

[CA_Abhishek]

1) As per my understanding, Udemy is not registered in India under GST, (As I am not able to see it's GSTR number on tax invoice shared by you for indian invoice, which is compulsory to show as per GST act on every invoice one share), also you can check the same by searching 'gst number search by name'. If Udemy is not registered under gst, question of gst collection doesn't arise. Also you can read RCM rules on import and export of services for better understanding.

Further (just for example) considering Udemy do collect GST from students, so what it's tax on the income of Udemy not yours. Udemy gives you 37% of whatever be the %, for the course uploaded by you after indirect taxes. Udemy does its part w.r.t. sale tax /gst is concerned. It has nothing to do with your tax compliance. You providing service to Udemy by uploading courses on their platform you are responsible for gst registration and return filing, Udemy Sales your service to end consumer, Udemy doing its part by collecting taxes from students. What is the issue? For your service you will receive specific % of revenue from Udemy and for Udemy it will receive 100% income from student.

2) US withholding tax is different, we call it as direct tax and TDS. Udemy deducting it for its home country I.e. US. and will give you tax credit form so that you can claim it in your country as per applicable DTAA between India and US and it's deducted directly from your specific persentage of income.

[LearnAnywhe151]

Thanks for the reply but I think you are mistaken.

Adding to Alpha's comment.

This is what Indian student gets in invoice, it clearly says the course is sold by India llp and not US based.

[CA_Abhishek]

To LearnAnywhe151 @LearnAnywhe151 

If Udemy india selling course to indian students, it will collect gst as now it will not amount to export/import of service. It's between India to India. For this as well, its udemys tax, nothing to do with yours. It's service from Udemy to students, on your service from you to Udemy, gst provisions will apply to you. Trail will be read as follows

1) You - (Export of service to) Udemy US

2) Udemy US do inter branch transfer of service to its fully owned subsidiary / branch at India

3) Udemy india will sell service to indian students.

[Alfa-eLearning]

@CA_Abhishek As an instructor we have limited info with respect to particular purchase so I just provided that screenshot but @LearnAnywhe151 provided what indian student gets on purchase.

Udemy sells to indian students and deducts GST. After that Udemy pays 37% to instructor as royalty. This 37% we instructors get as royalty NOT for selling anything to Udemy and Udemy already sold course(s) to students and did GST part. So how can GST comes into picture for this 37% instructor share ? I think it should be only income tax on this 37% money received on instructor end.

[Alfa-eLearning]

@CA_Abhishek I found below GST number for Udemy India LLP and it says it is registered in Harayana state.

06AAFFU9763M1ZE

[CA_Abhishek]

@Alfa-eLearning @LearnAnywhe151 

That's great, it cleared all confusion considering Udemy india in involved. Sale to indian students is a domestic sale liable to gst by Udemy India's part.

You are being paid royalty/ like commision for both domestic and non domestic sale by Udemy. That's your revenue/turnover and it will be different from Udemy sales. So now where is the confusion? 

Don't consider it as a double taxation on the same income. It's the nature of indirect tax, it keeps on passing from one layer to another and finally to customer.

(According to you, if A give part service to B and B give final service to C, who will charge Gst to whome? As per you, only B will charge to C on full amount. But that's not correct, A will charge Gst to B (say 18 on ₹ 100) & pay ₹18 to govt., then B will charge GST to C (Say 36 on ₹. 200) and B will pay to govt ₹ 18 (36-18). In this way govt gets Rs. 36 from A & B both. This is how indirect tax system works. So don't get confused considering it as a double taxation.

You are not providing service to Udemy india, you are providing the same to Udemy USA it's Export of service.

If you had provided service to Indian Udemy, you have to raised gst invoice and Udemy india will have taken ITC of that GST and and deducted this GST from the final GST which it would have collected from all students and paid the remaining to govt.

But in your case provisions related to export of service will apply. There is many provisions under gst which is applicable to exporter and can also make your export exempt. But it all gst provisions will be applicable to you like registration and filing return etc.

Also don't just think about sale to indian students by Udemy, Udemy also selling your courses to non Indians, what you will do for those transections? Will you say like Udemy has already paid taxes to other country so you will not paid to indian govt? No... This does not making any sense. You should have to consider tax based on activities. You can not take shelter behind tax compliance by Udemy. From your activities you are getting royalty/commision and on that you have to pay tax be it direct or indirect. 

Well above information is provided by me based on my understanding of Udemy model and gst provisions applicable at this point of time. You are advised to consult with your CA for more details.

Thanks

Regards

CA Abhishek Jain

caabhisheksjain@gmail.com

[Alfa-eLearning]

@CA_Abhishek Here A & B both are collaborating to sell an item to C. A is providing it's expertise (content) and B is providing it's expertise (platform). Both are partners for selling an item to C. Do you think both partners will pay separate GST (18%) on same invoice ?

[CA_Abhishek]

It not called as partners, it's called service provider and receiver...in case of goods cycle are like, manufacturers, distributors, wholesaler, relater and then end consumer, goods moves from all this cycle to get to end consumer. Here in all steps gst is being charged and pass on to next layer until it is finally consumed by customer. It's very basic. I'll suggest you to read how pass on ITC works under indirect tax.

There is no partnership and partner relationship exists in this type of transections under GST.

[Alfa-eLearning]

Let's assume GST is applicable then can't it's credit claimed just like other businesses ?

[CA_Abhishek]

No you can't, Udemy india can if you raised a bill with gst to Udemy india instead of Udemy USA. You are the starting point of service, how can you take credit of gst paid by second layer? What credit you can take is - GST Paid by you on purchase of service like when you outsource part of your service to outsiders and he issue a gst invoice, that credit you can take and for gst charged by you to Udemy india, ITC will be taken by Udemy india, (if you issue invoice to Udemy india only).

Bhai.. you need not to worry, you need not to pay even a single rupee on export subject to you fulfill the required conditions under gst act. Just consult with your CA he will explain you all provisions in detail.

[Alfa-eLearning]

@CA_Abhishek I am not worried bhai. My CA does all things for me. I just pass him all Udemy earning details. He said GST does not come in place for royalty income and here you have a different opinion from my CA so we are discussing.....

[CA_Abhishek]

I think you might have misunderstood him, I don't think he said "gst is not applicable on royalty income", he must have told you that your export of service will be exempt subject to fulfilment of some conditions which he might be taking care of on your behalf.

Just ask him where it is written in gst act k gst is not applicable on royalty income, also try searching on Google for your reference. See...below given screenshot 

[ChiragMehta777]

Simple thing is we as instructor are not selling the course from our inventory. The earnings would fall under purview of income tax and be subjected to same. 

[Alfa-eLearning]

@CA_Abhishek Consider this as 2 partners running a business and have 1 GST number. After every sale of item they deduct 18% GST and whatever amount left they devide amoung themselves (percentage based revenue share)

[CA_Abhishek]

Please refer my comment on your reply containing gst number of Udemy. I don't know how to share link of particular reply. I hope you may get idea what I'm trying to convey.