Indian Service Tax definition of 'advertising agency' and liability to pay Service Tax.

Indian Service Tax

Clarifications

Directories and Yellow Pages

[TN No. 99/GL-90/C.E./PRO/CAL-II/99, dt. 16/9/1999 of the Calcutta Commissionerate]

Sub: Service Tax - Compilation, printing and publishing of Telephone Directories, yellow pages and business directories covered under the definition of 'advertising agency' and liability to pay Service Tax.

• Attention of the Trade and Field Formations are invited to the fact that doubts have been raised as to whether persons engaged in the activity of compilation, printing and publishing of telephone directories, Yellow pages and business directories are covered under the definition of 'advertising agency' and accordingly liable to pay service tax.

• The matter has been examined by the Ministry of Finance, Department of Revenue (Tax Research Unit). It has been decided that in the case of persons, who are printing and publishing telephone directories, Yellow pages or business directories, their activity is essentially of printing a readymade advertisements from the advertisers and publishing the same in the directory. Their activities are similar to those carried out by newspapers or periodicals. As such, this activity shall not attract service tax. However, if these persons also undertake any activity relating to making or preparation of an advertisement, such as designing, visualising, conceptualising etc., then they will be liable to pay service tax on the charges made thereon.

Agencies in Canvassing

Cir.No. 64/13/2003-ST, Date: 28/10/2003

• 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.

Commission paid by Broadcasting Agency

F.No. 341/43/2001-TRU, Date: 18/10/2001

For full text see "Broadcasting Service".

Free Commercial Time - Exempt

Cir. No. 78/08/2004-ST, Date: 23-3-2004

Sub: Service Tax on the production of Television serials.

• Representation have been received in the Board with regard to levy of service tax on the activities undertaken by the television serial producers, who either

  (i) Sell TV serial episodes to the TV channels, or

  (ii) Allow such episodes to be telecasted by the channels in lieu of procurement of Free Commercial Time (FCT), which is sold by them to advertising agencies for showing advertisements.

• It appears that in some jurisdiction service tax is being demanded on the services listed at ('i') under the category of Videotape Production Services, and in respect of services listed at ('ii') under the category of Advertisement Agency Services.

• The issue has been examined. The taxable service i.e. "video tape production service" is on the process of recording of any programme, event or function on magnetic tapes (including editing thereof). The tax is therefore limited to the technical function of recording or editing what is recorded and not on the entire gamut of production of serials. In case the producer hires a videographer or an editor, the payment made for services would be taxable at the hands of such service providers. However, no tax is leviable on the producers for selling the serial to channel.

• Similarly, in case of FCT, selling the time allotted to a producer does not fall within the purview of "advertisement service" since this activity is not connected to making, preparation, display or exhibition of advertisement. This is akin to providing space in a newspaper or magazine for publishing an advertisement and has nothing to do with actual presentation of the advertisement