Disclaimer: I am no lawyer, no CA. So use this at your own risk! ⚠️
Taxation is a hard, complicated and boring topic!
But it comes back every time there is a WordCamp in India.
I need to deal it as a WordCamp Pune organizer, as a sponsor and a friend of other WordCamp organizers.
So here is a guide based on my own experience. If you have any suggestions, please pass. I will be happy to correct this.
As organizing a WordCamp includes a lot many entities, let’s list down entities commonly involved:
- Organizer – There can be many organizers, but for the sake of this article, we will consider organizer is an entity who handles finances. It can be a person or a company or both. Yes, a WordCamp team can have multiple entities taking care of some part of finances such as one entity collecting payments for ticket sale, another one receiving sponsorship payments.
- Sponsor – This one is straightforward. Likewise an organizer, a sponsor can be a person or a company. Some WordCamp offers micro-sponsorship options for individuals. From the taxation point of view, who is sponsoring is more important than which sponsorship slab is used.
- Vendors – These are suppliers for different things required for a WordCamp such as a venue, food, swag, after-party to name a few. Indian WordCamps procure a lot of stuff from the small vendors. Most of them accept payment in cash and do not give proper tax invoice. It makes sometimes applying tax rules very hard.
- Attendees – Don’t be surprised. After GST, you may need to collect GST on WordCamp ticket sales. In any case, this likely be taken care by payment gateway and easier to handle. You can make ticket price tax inclusive so that attendees won’t feel the pinch of it.
- Speakers – They get free tickets. WordCamp speakers are not supposed to get any reimbursement for travel or any incidental expenses. So as speakers do not have financial transactions with WordCamp, let’s ignore them from the tax-related discussion.
- Volunteers – From tax perspective, if volunteers get a free ticket, they can be treated like speakers, or if they discount, then they can be treated like attendees. Both cases, are already discussed above.
Based on above, let’s focus on organizers, sponsors, and vendors.
All of these can take two forms such as individuals or businesses. Some rules also have different ways when dealing with foreign entities.
I will highlight differences wherever applicable. ?
Type of taxes
Broadly classifying – we need to deal with two kinds of taxes – direct taxes and indirect taxes.
Direct Taxes (TDS)
Income tax is an example of direct tax. I think it is the only direct tax we pay, if liable.
In the case of direct taxation, TDS (Tax Deducted at Source), need to be handled. TDS is equivalent of tax withholding in the United States.
Between Organiser and Sponsors
Before you jump out of chair screaming that you, as a WordCamp organizer, are not making any income from organizing a WordCamp, please understand every time you accept a payment of more than Rs. 30,000 in a financial year from a single source, the source (sponsor) in this case, must deduct your income tax in the form of TDS.
The only exemption is when Sponsor is an entity without TIN (Tax Identification) number. Individuals do not have TIN.
Let’s understand the entire flow of event with an example.
- rtCamp, a company with TIN, wants to Sponsor a WordCamp in India for slab Rs. 50,000.
- rtCamp will deduct 10% TDS i.e. Rs. 5000 if the organizer has PAN. The deduction will be higher if the organizer doesn’t have PAN. But an organizer without PAN is unlikely to happen.
- rtCamp will pay organizer Rs. 45000.
- rtCamp will pay Rs. 5000 to tax authorities.
- The organizer can verify if rtCamp has paid Rs. 5000 to the Govt. of India by checking own 26AS statement. Reflecting payment in 26AS can take up to a quarter.
- rtCamp will also issue a Form 16 to the organizer by the end of the financial quarter.
Things to check/remember
- The organizer can ask for a TIN number if they are not sure if the sponsor is based in India or eligible to deduct DS. Every entity who can deduct TDS needs to have a TIN number.
- The sponsor must ask for PAN number. Because TDS deducted need to be linked to PAN number. Also if PAN number is not present, the deduction is very high.
Between Organiser and Vendors
If an organizer is an entity with a TIN number, they can deduct vendors’ TDS the same way sponsor deducts TDS of the supplier.
Limit of Rs. 30,000 still applies with a caveat. This limit needs to be considered for the overall transaction between organizing entity and the vendor.
So even if a vendor supplies things worth Rs. 5000 to WordCamp, but if they have the previous relationship with organizer where the limit of Rs. 30,000 is already exceeded, then organizer must deduct TDS for the vendor.
Form vendor perspective, the organizer is a client, and WordCamp related order is one of order in the overall relationship!
What happens to TDS – deducted money?
Sponsor deposits deducted amount with organizer’s linked PAN number.
The entity holding that PAN can use deducted amount to offset its tax liability.
If you have negative tax liability after applying for TDS credit, you can get a refund from the govt for excess payment. Depending on your tax returns, you can get 100% of tax refunded from the govt. The return process is easy. Your CA will help you.
The only issue you need to think about is – do you want to wait for refund/returns before you count that tax liability towards your WordCamp revenue?
Based on above example, Rs. 5000 is yours. So even when you get Rs. 45000 in your account, you should consider Rs. 50000 as payment received from the sponsor for the sake of WordCamp accounting.
Indirect Taxes (GST)
From July 1, 2017, there is only one indirect tax in India i.e. GST.
Although the intention of GST is to make our life easy, it is one of the biggest tax reforms in the history of India. Such a significant change always have its share of transitional issues. There are many things unclear about GST so that this section will evolve.
GST currently have two forms such as “IGST” and “CGST + SGST.” In both cases, the tax amount is same. I will not get into details to keep the article from getting lengthier. So collectively I will refer it as GST.
Likewise TIN, GST has GSTIN (GST Identifier).
Between Organiser and Sponsors
First, if the sponsor is not Indian, you shouldn’t charge them GST.
You can treat any sponsorship received from abroad as export. Exports don’t have indirect tax.
But if the foreign sponsor decides to pay from Indian entity, then treat them as Indian sponsor. The sponsorship invoice should be in INR.
If the organizer has GSTIN number, they can charge GST upfront.
I believe GST rate applicable would be 18%.
If the organizer doesn’t have GSTIN number, then do not add GST number.
Sponsor may still need to pay GST (likely 18%) under reverse charge mechanism.
Either way, GST amount on sponsorship is additional cost sponsor should bear. Sponsors must not treat it like TDS. Hence sponsors are not supposed to deduct it from sponsorship amount paid to organizers.
Unfortunately, this will increase the cost of sponsoring WordCamps in India for some local sponsors!
If the sponsor has the enough domestic (Indian) sale and collects GST from their customers, they won’t feel a pinch. But for companies whose maximum customers are abroad, GST will directly cost extra to them.
This is the case with rtCamp, and our CA firm is analyzing GST to check if excess GST can be refunded. If refund provision is there, then there won’t be an additional cost to sponsors!
Between Organiser and Vendors
If a vendor has GSTIN, they may charge GST to organizers.
If the organizer is an entity with GSTIN itself, then the organizer can ask vendors to put customer’s (in this case organizer) GSTIN on the invoice.
From WordCamp accounting perspective, GST amount should be considered as part of the expense.
If organizers with GSTIN are getting input credits for GST, they should pass GST amount to WordCamp account.
How to give such GST amount in a tax-friendly manner is another complicated question! I will try to write about it some other day.
As I said, taxation is a hard and tedious topic. But I hope this article can help few WordCamp organizers in India.
If you have any questions or suggestions, please let me know.
Always remember – your CA will be the always better person to deal with questions!