Indian Service Tax
Advertising Agency
Effective Date: 01/11/1996
Authority: Notification No. 6/96-ST, Dt. 31/10/1996 (See at the end of this Chapter).
Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003), 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.
Definitions
"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 65 (2)]
"advertising agency." means any commercial concern engaged in providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant, [Section 65 (3)]
Taxable Service: Advertising services provided by an. Advertising Agency (including an Advertising Consultant) to a client in relation to advertisement in any manner.
Value of Taxable Service: Gross amount charged by such Agency from the client for services in relation to advertisement.
Exemptions
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1. See chapter on "General Exemptions"
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2. Specific Exemptions
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Cinema theatres
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Free commercial time
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Telephone directories, business directories, yellow pages
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Canvassing if limited to space selling
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DAVP, Govt. Agencies/Depts
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Making of neon sign-boards
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Person liable to pay: Advertising Agency
Head of Account
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Question & Answer
Q. Can Cinema theatres be treated as advertisement agencies as they project advertisement?
Ans. The Cinema theatres cannot be treated as advertisement agencies as they project advertisements only on behest of advertising agencies. Further it has already been clarified that the amount paid by advertising agency for space and time in getting the advertisement published in print media (i.e. newspapers, periodicals etc.), or the electronic media (Doordarshan, Private TV Channels, AIR, Cinema Theatres etc.) will not be includible in the value of taxable service for the purpose of levy of Service Tax.
[Source: Directorate of Publicity and Public Relations, Customs & Central Excise, New Delhi, October, 2003].
Main text of Departmental Circular/TN
[TN No. 138/96, dt. 27-11-1996 of the Cochin Commissionerate)
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Service Tax is to be computed on the gross amount charged by the advertising agency from the clients for services in relation to advertisement irrespective of the fact that the advertising agency directly makes or prepares advertisement or gets it done through another person. However the amount paid by the advertising agency for space and time to print media or electronic media (i.e., Newspaper, Periodicals, Doordarshan, Private Television Channels, All India Radio etc.) need not be included in the taxable value. However, the commission received by the advertising agency would be included in the value of taxable services.
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The expenditure incurred on account of travel transportation, stay in hotel etc. in relation to advertisement by the advertising agency the value of taxable service should include the above said expenditure also.
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The expenditure incurred on market research by the advertising agency is to be included in the value of taxable service.
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The amounts paid directly by the clients to foreign Television Channels in foreign currency are not to be included in the taxable service as the amounts are not charged by the advertising agency from the clients.
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In many cases the advertising agency gets a documentary or film prepared by an independent film producer on behalf of the client. In such cases, the expenses incurred on getting the film or documentary produced on behalf of the client should be included in the value of taxable service by the advertising agency. In case the film producers choose to charge the client directly, then the film producers will be liable to pay Service Tax accordingly.
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Even if the advertising agency fails to collect the Service Tax, the responsibility for payment of tax lies on the advertising agency only.
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