Influencer tax to hurt creators

The new tax on social media influencers may impact smaller creators, prompt renegotiation of some deals, and make brands more selective in whom they work with, industry experts and stakeholders said.

Under the new rule which took effect this month, social media influencers will have to pay 10% tax deducted at source (TDS) on freebies or any other form of payment made in kind, if the value of the product is above ₹20,000.

“For micro- and nano-influencers this is a big deal. A lot of creators get their remuneration in the form of products,” said Gaurav Jain, once a social media influencer, and now chief executive and founder of an influencer marketing company Creators Gram. Micro- and nano-influencers have fewer followers—often in the thousands—and earn significantly in freebies.

“For influencers, this means they’ll be paying tax for (brand) collaborations where they received no money,” said Ankit Agarwal, CEO and founder of Do Your Thng, an influencer marketing firm. He added that it will also change the rules of the game for how brands approach partnerships with creators.

Jain noted that smaller brands, which sell primarily through social media and do not have storefronts, mostly rely on collaborations with influencers to promote their products. He said such firms will have to rethink their promotional efforts now. Similarly, mid-sized brands often strike deals with creators who have large followings, where they send products worth a fixed amount every month, in return for posts through their social media handles. Such deals are easier for these brands, since they cannot afford the creators’ quotes otherwise. These too may stop, according to Jain.

“We were giving gift vouchers to nano-influencers. Now, we will have to pay 10% extra. The cost will go up a little for us in certain categories of influencers,” said Sanjay Vasudeva, founder and CEO, BuzzOne Influencer Marketing.

It’s not all bad news for the industry though. Vasudeva noted that the tax could bring small creators, who often don’t see their work online as a job, within the tax net. The size of the influencer marketing industry in India was estimated at ₹900 crore, according to GroupM INCA’s influencer marketing report, published in September last year.