Service Tax - Valuation - Commission paid by broadcasting agency to the advertising agency not includible in assessable value

Indian Service Tax

Clarifications

Agency Commission

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

Sub:- Service Tax - Valuation - Commission paid by broadcasting agency to the advertising agency not includible in assessable value

I am directed to say that doubts have been raised as to whether the "value of taxable service" in respect of broadcasting services will include the commission paid by the broadcasting agency to the advertising agency or not. The facts of the case are as follows.

2. In the invoices raised by the broadcasting agency on the advertising agency, the gross amount for the broadcasting services is indicated. From this amount, the commission or discount (usually 15% of the gross amount) given to the advertising agency is deducted and the net amount payable by the advertising agency to the broadcasting agency is indicated. Thus what is "received by the broadcasting agency" for the service rendered is the net amount excluding the commission or discount. In some cases, only the net amount is invoiced to the advertising agency.

3. The matter has been examined by the Board. The value of taxable service is the amount received by the broadcaster for providing the broadcasting service. Therefore, service tax is leviable only on the amount received by the broadcaster for the services rendered. Since the amount received by the broadcaster is net of the commission or discount paid to the advertising agency, service tax will be payable on this amount. However, such abatement towards commission/discount shall be allowed only when the same is clearly indicated in the invoicelbill raised by the broadcasting agency on the advertising agency. It will be relevant to mention here that on the commission/discount received by the advertising agency, service tax is separately leviable under the category of advertising services. In this regard, your attention is invited to Board's circular F. No. 341/43/96-TRU, dated 31-10-96 wherein it was clarified that the commission received by the advertising agency for getting the advertisement published in the print media (i.e. newspaper, periodicals etc.) or the electronic media (Doordarshan, private channels, AIR etc.) will be includible in the value of taxable service under the category of the "advertising service".

Doordarshan and All India Radio

Cir.No. 61/10/2003-ST, Date: 14/7/2003

Sub:- Service Tax on Doordarshan and All India Radio under the category of Broadcasting Services.

I am directed to refer Board's letter of even number dated 27th March 2003, on the above cited subject. In continuation of the referred letter, I am directed to say that the protection was available to Prasar Bharati Corporation (Doordarshan and All India Radio) from payment of the Service Tax on the basis of interpretation of Section 22 of the Prasar Bharati ( Broadcasting Corporation of India) Act, 1990.

The Section 22 of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 hax been omitted vide Section 163 of the Finance Act, 2002 with effect from 1st April 2003. In light of the above, I am directed to say that with effect from 1 st April 2003 the protection under Section 22 of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 is no longer available to the Prasar Bharati Corporation (Doordarshan and All India Radio) and they are liable to pay the Service Tax as the provider of the Broadcasting Services with effect from 1 st April 2003.

The instructions issued vide the letter dated 27th March, 2003 is modified in above terms and the field formations should be suitably instructed to get all units of Prasar Bharati Corporation registered immediately.