Hi,
I used to run an advertising agency which only dealt with advertisements in print media/newspapers. I set it up after completing my college in 2016. Unfortunately the same had to be closed this year due to zero business thanks to covid and some heart related issue that was diagnosed in me recently and hence I was unable to work.
Received a notice from the local CGST office. They asked for the service tax deposited details, service tax returns, balance sheet etc. All the details were provided to them. Now they have raised few queries again, for which I needed some guidance.
1. As an ad agency here is how we used to raise our invoice
Abcd wanted us to publish his ad in XYZ newspaper. The gross amount was 100. Our commission was 15%. So, we used to charge him 100+2.25% (15%x15% i.e. service tax on the service rendered by us or on our commission only) = 102.25/- and then send Rs. 85 to the XYZ newspaper. Newspaper used to send us a bill of Rs. 100 as they were not liable to charge service tax. This is a general practice followed by all newspapers and agencies in India.
Now the CGST office has asked us that why we weren't charging the service tax on Rs. 100 itself?
Found these
- Print Media/Newspapers not liable to charge service tax under section 66D
Check point (g)
Check point (g) on page 9
If you check this link https://www.caclubindia.com/forum/service-tax-for-advertisement-agency-36682.asp it clearly mentions this
The above value, includes the gross amount charged by the agency from the client for making or preparing the advertisement material, irrespective of the fact that the advertising agency directly undertakes the making or preparation of advertisement or gets it done through another person as well as the commission received by the agency. However, the amount paid excluding their own commission by the advertising agency, for space and time in getting the advertisements published in the print media (i.e. newspapers, periodicals, etc.) or in its Broadcasting will not be includible in the value of taxable service.
But the above lines are not mentioned on the official website https://www.cbic.gov.in/htdocs-servicetax/st-profiles/ad-agency-serivce
What should be the answer for this point?
2. Someone asked this same very question here https://www.caclubindia.com/forum/service-tax-for-newspaper-advertisments-380972.asp and here https://www.taxmanagementindia.com/web/View_discussions_detail.asp?ID=111136
3. In the balance sheet we have shown sales as receipts and newspaper bills as advertisement expenses. Are these two heads correct?
4. Someone told me that since we are deducting our share i.e. Rs. 15 (continuing with the example in the first point) and then transferring the rest to the newspaper, we should mention this as income or service given and not as commission because as per that person commission is something which the newspaper gives us via cheque etc. after taking the whole amount from us. Is this correct?
5. Some clients deducted tds of ours under section 194C. The department has asked us on what basis our tds was deducted under this section because they said that this section is for contracts. What should be the answer for this? A client goes to an advertising agency, pays the money or gets the credit period, and has his/her ad is published. Again there is no written contract.
P.S. An ad agency is not liable to deduct tds while transferring the amount to the newspapers
https://www.incometaxindia.gov.in/communications/circular/circular_5_2016.pdf
https://taxguru.in/income-tax/circular-715-dated-881995.H T M L
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