Table of Contents
Introduction
GST on Affiliate? Affiliate marketing has become a lucrative income stream in India, allowing individuals and businesses to earn commissions by promoting products and services. But are you aware that your affiliate earnings may attract Goods and Services Tax (GST)? Misunderstanding tax obligations can lead to non-compliance, penalties, and financial setbacks.
Understanding the GST framework for affiliate income is crucial for digital entrepreneurs, influencers, and businesses operating in the online marketplace. This guide provides a detailed, professional, and legally accurate explanation of GST applicability on affiliate marketing and commission-based earnings in India, ensuring that you remain compliant while maximizing your income.
Understanding Affiliate Business and Commission-Based Income
What is Affiliate Marketing?
Affiliate marketing is a performance-based earning model where individuals or businesses (affiliates) promote products or services and earn a commission for each successful sale or lead. It involves unique referral links that track conversions, ensuring affiliates get compensated based on their influence and reach.
What is Commission-Based Income?
Commission-based income refers to earnings received for facilitating a transaction between two parties. It includes referral fees, brokerage, and intermediary services, making it a key component of digital and traditional businesses.
GST Applicability on Affiliate Marketing and Commission-Based Income
Is GST Applicable to Affiliate Income?
Yes, GST applies to affiliate marketing income in India. Under Section 7 of the CGST Act, 2017, commission earnings fall under “Supply of Services.” Affiliates must determine their GST obligations based on turnover and transaction nature.
GST Registration Requirements for Affiliate Marketers
- Threshold Limit for GST Registration:
- ₹20 lakh (₹10 lakh for special category states) for service providers.
- Mandatory registration if earnings exceed this limit.
- Compulsory GST Registration (Irrespective of Turnover):
- If affiliate income is earned from a foreign company (export of services).
- If commissions are received via an e-commerce platform (as per Section 24 of the CGST Act).
GST Rate on Affiliate Marketing and Commission Income
- Standard GST Rate: 18% (classified under SAC Code 9983 – “Other professional, technical and business services”).
- Export of Services: If affiliate income is earned from a foreign entity and qualifies as an export, it may be exempt from GST under Section 2(6) of the IGST Act.
GST on Domestic vs. International Affiliate Commission
GST on Domestic Affiliate Income
If an affiliate earns commission from an Indian company, GST at 18% applies. A tax invoice must be issued, and GST must be collected if registered.
GST on International Affiliate Income (Export of Services)
- The recipient is outside India.
- Payment is received in convertible foreign exchange.
- The affiliate is located in India.
- The service is used outside India.
GST Implications on Export of Services:
- With LUT/Bond: No GST payable if a Letter of Undertaking (LUT) is filed.
- Without LUT/Bond: GST at 18% applies, but a refund can be claimed.
Invoicing and Compliance for Affiliate Marketers
Issuance of Tax Invoice
- GSTIN of both parties (if applicable).
- Service description.
- GST rate (18%).
- Invoice number and date.
Reverse Charge Mechanism (RCM) on Commission Payments
If an Indian company pays commission to a foreign affiliate, GST is payable under the Reverse Charge Mechanism (RCM).
Input Tax Credit (ITC) for Affiliate Marketers
- Affiliates can claim ITC on GST paid for business-related expenses like advertising, hosting, and software.
- ITC cannot be claimed on personal expenses.
Exemptions and Special Considerations
Exemptions for Small Affiliate Marketers
- If total commission income is below ₹20 lakh (₹10 lakh for special category states), GST registration may not be required.
- However, GST registration is mandatory if commission is received via an e-commerce platform.
Composition Scheme for Affiliate Marketers
- The GST composition scheme does not apply to service providers earning commission income.
Common Compliance Mistakes by Affiliate Marketers
- Not Registering for GST When Required – Ignoring turnover limits or compulsory registration rules.
- Incorrect GST Rate Application – Commission income is subject to 18% GST, and incorrect application may result in penalties.
- Failure to Maintain Proper Invoices and Records – Proper documentation is essential for compliance and ITC claims.
- Misunderstanding Export of Services – Affiliates must ensure compliance with export rules to claim tax exemptions.
Frequently Asked Questions (FAQs)
Is GST mandatory for affiliate marketers in India?
Do I need to charge GST on affiliate commission?
Can I claim Input Tax Credit (ITC) as an affiliate marketer?
Is foreign commission income subject to GST?
What if I earn commission from Amazon, Flipkart, or other marketplaces?
Conclusion
Understanding GST implications on affiliate marketing and commission-based earnings is critical for digital entrepreneurs and online marketers in India. Staying compliant ensures smooth operations, avoids legal penalties, and maximizes tax benefits. Always maintain accurate records, issue invoices correctly, and stay updated on GST amendments.
For expert guidance and the latest GST updates, follow TaxGroww.