Indian app developers earning revenue through Google Play and the Apple App Store face unique GST compliance challenges. Both platforms charge a commission (typically 15-30%) on sales and in-app purchases. The treatment of this commission and the revenue earned by the developer depends on whether the transaction qualifies as an export of services.
This article explains the GST implications of app store commissions for Indian app developers.
App Store Commission Structure
- Apple App Store: 30% commission for the first year of subscriptions, reducing to 15% after year one. Developers earning less than $1 million per year qualify for the Small Business Program, which offers a 15% commission.
- Google Play: 30% commission for the first $1 million in revenue, reducing to 15% above that. Subscriptions attract a 15% commission.
GST on App Store Revenue
If an Indian app developer receives payments from Google or Apple's overseas entity in convertible foreign exchange, the transaction may qualify as an export of services under GST. In such cases, the developer is not required to charge 18% GST, and the supply is zero-rated.
However, if the payment is received from Google or Apple's Indian entity , the transaction is a domestic supply, and GST at 18% applies.
ITC on App Store Commissions
If the transaction is treated as an export of services, the developer can claim ITC on inputs and input services used to develop the app, including:
- Development tools and software.
- Cloud hosting and infrastructure.
- Marketing and advertising.
- Design and creative services.
To claim ITC on exports, the developer must file a Letter of Undertaking (LUT) and report the export in GSTR-1 .
Compliance for Indian App Developers
- Determine whether payments are received from the overseas or Indian entity.
- If export, file LUT and report zero-rated supplies.
- If domestic, charge 18% GST on the supply.
- Claim ITC on eligible expenses.
- Reconcile revenue with GST returns.
- Maintain FIRC/FIRMS for foreign remittances.
Common Issues
- Misclassifying domestic revenue as export.
- Failing to file LUT.
- Not claiming ITC on app development expenses.
- Mismatch between revenue reported and GST returns.
Conclusion
App store commissions and revenue are subject to specific GST treatment. Indian app developers must determine whether their transactions qualify as exports and comply accordingly. Proper documentation and ITC claims are essential.
At Anuj Desai & Associates, we provide expert advisory services for app developers on GST compliance, export of services, and ITC optimisation. Our team can help you structure your app business for tax efficiency.
For a confidential consultation, contact us at office@anujdesaiassociates.com or call 9619456656. Visit our website at https://anujdesaiassociates.com or connect with our founder on LinkedIn at linkedin.com/in/ca-anuj-desai-122547230.