Influencer marketing is undoubtedly flourishing as the brands aim to enhance their digital presence by engaging a broad audience virtually. A booming industry recently, it bridges the gap between a brand and its audience. Taking over the internet by storm, influencer marketing is a dynamic approach adopted by brands to communicate with their audience, convey their message and have a positive impact along with brand recognition by having reliable faces associated with it.
With an objective to bring social media and influencer marketing under tax ambit, the new provision asks for the accountability and transparency of the exchange. Apart from the payment, the freebies or samples sent for promotion by the brands mainly accounted for under barter collaboration are the prime subjects that need attention in adherence to this provision.
The change in system and introduction of new provisions will have a major impact on the micro-influencers, dealing in barter collaborations and tech influencers who receive technology and IT-related goods for promotion.
However, returning the sample or promotional goods after the campaign will exclude the taxation or TDS on the amount. And thus, considering the grey area, experts in the industry and leading Influencer marketing agencies suggest dealing in collaborations that involve monetary compensations.
It is in human nature to save money & many people want to avoid paying taxes or find ways to save tax. Even experienced Professionals & Businesses try their best to save tax.
FREEBIES & BARTER DEALS WILL BECOME THING OF PAST!
This is more likely to affect the Food & Travel influencers & even Beauty/Makeup influencers since these are non-returnable. Who will eat half-eaten bread or use a used Lipstick! There is a lot of confusion amongst the influencer community. One must note that Influencers unlike the Salaried class or established businesses are more likely to be oblivious to terms like Professional Tax, TDS & other tax jargons.
For Influencers who demand upfront payment even to start working on a promotion, it is going to be a herculean task for Agencies and Brands alike to make them understand about this new development. Influencers will most likely, avoid any further Barter Deals since they will have to pay tax. This will increase the collaboration cost as influencers will hike their commercials.
Bigger brands won't feel much of an impact, since influencers wouldn't mind paying tax on a premium product. On the other hand, smaller brands or start-ups who until now had relied on barter deals will have to shell out money which will affect their overall marketing spends strategy.
There is a bright side as well. Indian mindset is tuned to the fact that, anything that is taxable is a legitimate business. So parents in near future are more likely to be supportive of their child who wants to become an influencer. It will take time to understand the full implications of these new changes.
The new provision is said to be enforced from 1st July 2022.
The new provision will regulate the working dynamics of the influencer marketing industry along with transforming advertising and marketing domains.