Date of Introduction: 01.11.1996 vide Notification No.6/96-ST dt. 31.10.1996.
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) of Finance Act, 1994 as amended)
Taxable Event And Scope Of Service:
Taxable Service means any service provided to a client by advertising agency in relation to advertisement in any manner. (Section 65(72)(e) of Finance Act, 1994 as amended)
Value of Taxable Service:
The value of taxable services in relation to service provided by an advertising agency to a client shall be the gross amount charged by such agency for services rendered in relation to advertisements.
(Section 67 of Finance Act, 1994 as amended)
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.
The value includes the charges on account of travel, transportation and hotel stay.
If the market Survey / Research relates to the advertisement, all expenses that are charged from the client on account of Market Survey/Research relating to advertisement are includible in the value of taxable service.
The amount charged by foreign TV channels directly to their clients in foreign currency is not includible as these amounts are not charged by the Advertising Agency from the clients.
(Ministry’s F.No.341/43/96-TRU dt.31.10.1996)
Service Tax would be payable on the gross amount charged by the Advertising Agency from the Clients. The exclusion of cost of paper and printing is not permissible, as it constitutes a component of service provided.
In cases where the advertisement is given by the client in the newspaper through Advertising Agencies, the Service Tax would be leviable on the agency charges of the Advertising Agency, not on the total charges recovered from the clients.
Exemption & Exclusion:
i. The services provided by the Advertising Agencies to United Nations, an International Organization and certain specified Diplomatic Missions are exempted from payment of Service Tax. (Authority: Notification No. 48/98-ST dt.24.04.1998, 44/98-ST dt.22.01.1998, 47/98-ST dt.24.04.1998)
ii DAVP not being a commercial concern is not liable to pay Service Tax in respect of the services rendered by it to other Central Government Departments.
iii. Film/documentary produced by the Film Producer is not leviable to Service Tax provided that the advertising agency makes the payment of Service Tax on including the value of Film/documentary. In case the film producer chooses to charge
the client directly, in that case he has to pay Service Tax
(Ministry’s F.No.341/43/96 TRU dt.31.10.1996)
iv. The Service rendered by local cable Television operators of mere display of Advertisements in the Television Channels Broadcast through Electronic media and charges collected from Customers in respect of the cost of space and time for such display would not be leviable to Service Tax.
(Ministry’s F.No.341/51/2000 TRU dtd.22-11-2000)
v. Release of advertisement directly in the News Papers (not through advertising agency) by the clients, is not covered by Service Tax as service is being provided by the news paper and not the advertising agency.
Hon’ble High Court of Gujarat in the case of Addition Advertising Agency vs. U.O.I. [1998(98) E.I.T.14 (Guj)] held that the subject of tax is not talking on Advertising service but on actual rendering of service and the measure of tax as well as charging provision of tax is based on the gross amount paid for service. It is further held that the tax is not on Advertisement but is on the services rendered with reference to the Advertisement and there is a clear distinction between the Advertisement and Advertising Services and upheld the levy of Service Tax on Advertising Agency.