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GoDaddy India just shattered the domaining dreams of hundreds of Indians and they are moving their money elsewhere if the matter is not heard

Issue in question is the improper application of the service tax rule by GoDaddy India. We are being forced to pay 15% extra over and above auction wins. We are yet to check the sales, but it is probably the same in addition to the 20% cut making the total to 35%. 

This business has become so nonviable for us that we are moving our money to venues like bitcoins.

The ST rule was present before but was not enforced on companies billing from outside of India. From Dec 1, this became mandatory and GD was quick to make amends. I won an auction during that time and I was charged 15% ST on the renewal component only and not on the auction amount. We quickly realized it is the ST rule in effect and we didn’t find that as a problem.

However, many people started to report from last week that GD is now charging ST on the whole amount (auction amount + renewal). I didn’t know until I went to pay for 2 auctions I won. I was upset to see 300+ dollars extra on what I was supposed to pay. I mailed the support that I cannot pay this and the fact that GD should not be charging 15% on the entire amount. They replied that they think it is correct and I ended up with a ban on my account.

I have talked to many domainers and some tax experts and they have the opinion that ST should not be charged on the auction amount but only on a service fee – a 15% service tax on a smaller service fee component.  This is because domains are a product and winning an auction is not a service. I can produce countless examples for this thought being applied in our daily lives.

When we buy bitcoins online from exchanges based in India, we are not being charged 15% ST on the bitcoin price but on a service fee. The service fee is very minimal and hence the ST too is minimal.  See below:

ST on bitcoin

When we buy shares online through stock exchanges in India, we are not being charged 15% ST on the entire stock price but on a brokerage fee. The brokerage fee is very minimal and hence the ST too is minimal. See below: (Service Tax is on the brokerage amount only, read the first line in second page).

shares

What difference or justification can GD India give for charging us like this? We would like to hear from you.

Jijo Pappachan

Jijo Pappachan is a Chinese Domain names investor, trader, broker, author, and blogger. He started domaining in 2015 and made it big during the surge that time. He has sold more than 1000 domains. He is part of DNOAi, Domain Name Owners Association of India.
[Disclaimer: My analysis could be wrong. Do your own due diligence while making investment decisions. If you want me to write about something specific, email me.]

Comments 15

  • Thanks for the article. We will take a look and make sure the tax amount is correct.

    • Thanks Joe!

    • Hi Joe

      Are you around? Could you give us an interim update?

      Also, domains expired from Tucows are properly billed with different wordings. They are termed Purchase and Transfer and tax is on Transfer component. For domains expiring from GD, it is auctions and renewals and tax is on both.

      Why is there difference in billing of domains expiring from GD from that of Tucows?

      Order Number: 1071401706
      Product
      Quantity
      Term
      Price
      Expiry Domain Name Purchase
      godofearth.com
      1 Fee
      ₨ 612.24
      .COM Domain Transfer
      godofearth.com
      Manage

      1 Domain
      1 Year
      ₨ 571.00
      Subtotal:
      ₨ 1,183.24
      Tax:
      ₨ 85.65
      Total:
      ₨ 1,268.89

  • Joe is everywhere!
    Would like to know what happened with this.

  • Well. GoDaddy is think that this loophole of service tax is going to help them make more money. Its only going to damage their business. Such pricing are insane and we should contact legal authorities to control them. Also i would request all domainers to boycott Godaddy auctions. Just do not buy/sell anything from Godaddy Auctions. Service tax just can’t be applied on Auction Win price. Let us all raise our concerns to the higher management.

    If we were to pay 15% extra on auction win and then get 15% on selling price then what would we take. That’s 30% tax + 20% GoDaddy commission on selling the domain so there is no way you can make any money. GoDaddy needs to understand that.

  • This is terrible, i too stopped bidding on all the auctions, and if it doesnt change then i will remove my all names too from sales there. Though still expecting/hoping Godaddy india to fix and correct this otherwise there will be mass boycott by indians.

  • Subscription based items are Services; Others are products.

    Broadband connection, cell phone connection etc. are based on Subscription and hence they are service. ST is applicable on the full amount. You don’t own them. You enjoy the benefits by paying a fee.

    BTC is not subscription based, stocks are not, Domains are not. You own them after paying for it. Hence these are Products. ST for these should be on the service fee component, not on the entire amount. If they start charging 15% over and above BTC, stocks, will they make any business? No.

    Hosting is a Service. ST is chargeable on the entire amount. We don’t own it. We enjoy the benefits by paying a fee. Renewals cannot be owned. It is a Service and is subscription based.

    GoDaddy needs to understand this fact and change their billing method. Domains are owned. It is a product. It is an asset class.

    • A seller uses GD marketplace’s service to display their Product/Domain for sale. Godaddy charges them 20% to provide the service. So the service component only amounts to 20%. Now as per the norms one has to pay 15% (in total) as service tax of the value of the service provided. “I repeat it says 15% of the VALUE of THE SERVICE PROVIDED”. Hence Godaddy needs to collect 15% of the value of their service charge which is GD commission in this case (i.e. 20% of the sale amount). So its 15% of 20%, which is 3%.
      Service Tax on the value of the service provided is 3%

      PS: I am no tax expert.

  • We support you Jijo. Kind of ridiculous stand by Godaddy. Several who already paid and did not voice their opinion have already taken a loss.

    Glad you pointed this out and are bringing it to notice of larger domaining community

  • This is a very sad news and will affect people from India who are looking forward to make a domaining as part of their income.

    • Tarun

      We are equally upset as well. We were hell bent to bring domaining awareness in India. We don’t have any courage left when we ourselves are in dilemma if this issue is not solved in our favor. We are dependent on GoDaddy so much!

      Else, we have to come up with some “seamless business model” with Chinese domainers for the Chinese domains in a way that we will be able to buy and sell easily. This won’t work for keyword domains though.

      Let’s hope for the best!

  • We have an outside tax firm investigating this for us to be sure we are correct. None of the money Godaddy collects in tax can be kept by us, we have to turn it over to the governments we are collecting it for. It would not be a money making strategy for us as some have stated above as we do not keep tax money.

    • Hi Joe, thanks for handling this in professional manner as you have always been. We are looking forward for the verdict.

      Most of us know the tax you collect has to go to the government. Surely no doubt on that.

      Some comments might have come out of frustration but let’s get to the bottom of the issue and see what we can come up with.

    • The fact in India is that neither the tax firms nor the government can understand what really domaining is how much ever you try to explain them. Some favor it as a Service, while others say it is a Product or an Asset class. There is a thin line between the differences and often it is confusing for nondomainers. That’s where drawing parallels like how BTC is bought and sold in online exchanges would help. BTC exchanges are very new in India and they had no problem in setting it up as a Product (Asset class) and taking ST on a smaller service fee component. When there is confusion, the investigation should focus on whether it is okay to consider domains as an Asset class and hence can apply a lowered service tax, at the same time safe guarding the interests of all parties involved. We domainers have no doubt domains are Products as we can Own them by paying a price, but it is up to the taxmen to decide.

  • Jijo I think we are right here.
    Godaddy professionals should investigate the matter properly because the registrar is used widely here and if they still charge 35%,they would lessen out the customer base in India..

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