Taxability of services provided by advertisement agencies under service tax

By | November 22, 2013

Taxability of services provided by advertisement agencies under service tax

Services provided by advertisement agencies relating to making or preparation of advertisements would not be covered in negative list entry and would be taxable.

This would also not cover commissions received by advertisement agencies from the broadcasting or publishing companies for facilitating business, which may also include some portion for the preparation of advertisement.

Definition of term ‘advertisement’ – “advertisement”  means any form of presentation for promotion of, or bringing awareness about any event, idea, immovable property, person, service, goods or actionable claim through news paper, television, radio, or any other means but does not include any presentation made in person.

What kind of sale of space or time would become taxable and what would be not taxable?

Taxable –

  • Sale of space or time for advertisement to be broadcast on radio or television media,
  • Sale of time slot by a broadcasting, organization

Non-taxable –

  • Sale of space for advertisement in print media,
  • Sale of space for advertisement in bill boards, Public places (including stadia), buildings, conveyances, cell phones, automated teller machines, internet,
  • Aerial advertising

when a person provides a composite service of providing space for advertisement that is covered in the negative list entry coupled with taxable service relating to design and preparation of the advertisement then It would be a case of bundled services and taxability of which has to be determined in terms of the principles laid down in section 66F of the Act. i.e.

  • If such services are bundled in the ordinary course of business then the bundle of services will be treated as consisting entirely of such service which determines the dominant nature of such a bundle.
  • If such services are not bundled in the ordinary course of business then the bundle of services will be treated as consisting entirely of such service which attracts the highest liability of service tax.

Merely canvassing advertisement for publishing on a commission basis by persons/agencies is taxable because these services are not covered in the negative list entry.

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