Advertising Agency Service under service tax
Service tax has been imposed on advertising agency’s services from 01.11.1996 vide Notification No.6/96-ST dt. 31.10.1996.
“Advertising agency” means any person engaged in providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant.
“Taxable Service” means any service provided or to be provided to any person by an advertising agency in relation to advertisement, in any manner.
“Advertisement” includes any notice, circular, label, wrapper, document, hoarding or any other audio or visual representation made by means of light, sound, smoke or gas.
Section 65B defines “advertisement” as any form of presentation for promotion of, or bringing awareness about, any event, idea, immovable property, person, service, goods or actionable claim through newspaper, television, radio or any other means but does not include any presentation made in person.
The representations have been received in this office with regard in the leviability of Service Tax under the category of Advertising Agency Services in respect of persons agencies engaged in canvassing for advertisements for which they get commission from the publishers. The persons involved do not provide any service like making, preparing, displaying and exhibiting and only undertake canvassing for the advertising.
The term canvassing may merely invoice contacting potential advertisers and persuading them to give advertisement to a particular newspaper/periodical/magazine. The making and preparation of the advertisement namely, drafting of the text, preparation of layout is left either to the advertiser or to newspaper/ periodical /magazine. Such a service is known as ‘space selling’. In such cases, since the agency undertakes the job of merely bringing the order for an advertisement and does not undertake any further activity, it would not fall within the definition of advertising agency and will not be subjected to service tax.
On the other hand, ‘canvassing’ may involve such agency approaching a customer, receiving the texts of the advertisement (including photographs, monograms etc. of the customs), estimating the space that such advertisement would occupy in the newspaper/periodical/magazine, negotiating the price, informing the general layout of the advertisement, that would finally appear in such newspaper etc. In such cases the term ‘canvassing’ would certainly fall within the phrase ‘any service provided in any manner connected to making preparing, displaying and exhibiting’ and would be taxable service.’
In view of above, I have been directed to say that if the canvassing is limited to space selling then such services would not be liable to any service tax. However, if canvassing is involving receiving the text of advertisement, estimating the space that such advertisement would occupy in the newspaper/periodical/magazine, negotiating the price, forming the general layout of the advertisement that would finally appear in the newspaper then such activity would be liable to service tax under the category of Advertising Agency Services.
The Board vide Circular No.96/7/2007-ST dated 23.08.2007 on advertising agency services has clarified the following issues-
|004.01 / 23.08.07||Persons / agencies canvass advertisements for publishing, on commission basis. Such persons / agencies do not provide any other services like making, preparation, display or exhibition of advertisement.
Whether merely canvassing advertisement for publishing on a commission basis by persons / agencies is classifiable as Advertising Agency service [section 65(105)(e)] or not?
|Merely canvassing advertisements for publishing, on commission basis, is not classifiable under the taxable service falling under section 65(105)(e).
Such services are liable to service tax under business auxiliary service [section 65(105)(zzb)].
Taxability of composite services of providing space for advertisement with taxable service relating to design & preparation of the advertisement will be determined as per the provisions for `bundled services’ stipulated under the Act.