22 Oct Google India revenue dips as ad a/c lists under S’pore
This has resulted in a fall in revenues for the local unit by 56% to Rs 4,147 crore for the financial year ending March 2019. It has also reduced the share of advertising revenues for Google India from 69% to 28%, with majority now coming from what is classified as information technology (IT) and IT-enabled services (ITeS).
Profits of Google India increased by 16% to Rs 473 crore during FY19, according to ministry of corporate affairs (MCA) filings obtained from Tofler. The decision has been taken due to changes in accounting standards from IND-AS 18 to IND-AS 115, according to the filing made by Google India.
“As the control to operate the AdWords platform is with GAP (Google Asia Pacific) and not with the company (Google India), accordingly, revenues and associated direct cost of sales are presented on a net basis in the statement of profit or loss and comprehensive income,” said the filing.
Google India, which has been fighting tax cases regarding AdWords, has always maintained that it is the “non-exclusive authorised distributor of AdWords programme to the advertisers in India” and sees its role as an “advertisement agency”, similar to facilitating a transaction between a brand and a publisher.
Google India now only recognises the “net revenues” it makes from India. The money it spent buying inventory from the Singapore unit, classified as “purchase of advertising space”, has fallen from Rs 4,949 crore in financial year ending March 2018 to zero in the year ending March 2019.
While the fall in revenues is due to the change in accounting standards, Google India is expected to have continued growing it’s top line. Google, along with Facebook, controls 70-80% of India’s digital advertising market, which stands at Rs 16,000 crore, according to the latest report by KPMG.
Historically, Google India had transferred 50-60% of its total revenue earned in India to overseas arms — initially Google Ireland, and then Google Asia Pacific — in what it says is a consideration for “purchase of advertising space”.
Tax authorities in India have contested that such transfers are ‘royalty’, which is subject to taxation. Google has been asked to pay a tax on the amount transferred under “purchase of advertising space” for multiple assessment years from 2007-08 to 2016-17 under several rulings by the Income Tax Appellate Tribunal. A ruling for 2013-14, 2014-15 and 2016-17 came earlier this year when Google India was asked to pay Rs 475 crore. The order got a stay for six months in August.
In 2017, India introduced equalisation levy — a 6% upfront tax that advertisers have to pay to digital service providers, and is also known as ‘Google Tax’. From that year, Google India is not liable to pay tax on royalty because of it.