PUBLIC RELATIONS SERVICES- CA SUDHR HALAKHANDI
(The article was written when service tax was introduced on Public relations services- ca sudhir halakhandi)
Finance Act-2006 has introduced one more interesting and widely used service under the scope of service tax in the name of “ Public Relation Service” and this service is made taxable w.e.f. 01-05-2006. Let us see the details of this taxability on the public relation service introduced by the Finance Act-2006.
1.WHAT IS MEANT BY PUBLIC RELATION
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Public relations: - Section 65(86c) “public relations” includes strategic counselling based on industry, media and perception research, corporate image management, media relations, media training, press release, press conference, financial public relations, brand support, brand launch, retail support and promotions, events and communications and crisis communications.
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This is very interesting service, which is widely used by celebrities including the politician, Film, and TV stars, Artists, big Industrialists and even the Sports persons. There are some services in the net pf service tax, which are not used, by the common man and public and this is one of these services, which are only used by a certain class or celebrities.
To promote the image of self, product, financial scheme, brand etc. one has to engage the public relation agency and in turn the service provider means do all or some of the following acts to complete the task: -
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1. Strategic counseling based on Industry, media and perception research.
2. Corporate Image Management.
3. Media Relations.
4. Press release.
5. Press conference.
6. Financial Public relations.
7. Brand support.
8. Brand Launch.
9. Retail support and promotions.
10. Event and communications.
11. Crises communications.
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Here see this is an illustrative list and all the activities, which can be termed, as “Public Relations” is included in the definition of Public relations.
The dictionary meaning of Public relations is also important here because the definition given above is not an exhaustive definition.
Oxford Pocket dictionary: -
The dictionary meaning of “Public Relation” is professional development of a favorable public image by a company or a famous person.
Merriam Webster Online Dictionary: -
Public Relation: - The business of inducing the public to have understanding for and goodwill toward a person, firm, or institution.
Here the main object to use the services of public Relation agency to improve the public image and induce the public to think about better or improved and favorable image of the product or a person or an instrument may be a financial instrument.
What is the use of such engagement of a public relation agency: -
The use of public relation agency is to boost the image of a particular person or product and the purposes can be inferred from the following illustrations: -
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1.To convert the better image of a person in votes in case of politics.
2.To improve the sales of a product.
3.To launch a product, investment scheme or a instrument.
4.To improve the chances of success of a film by highlighting the image of a actor or actresses.
5.To induce the spectators to come and see a particular match or wrestling or boxing bout.
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Even in case of crises, the public relation agencies are booked to systematically induce and divert the public opinion to a particular mode and defuse the crises.
2.WHAT IS TAXABLE SERIVCE
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Taxable service: - Section 65(105) (zzzs): - Taxable service means any service provided or to be provided to any person, by any other person, in relation to managing the public relations of such person, in any manner.
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Taxable service here means the service provided or to be provided by a person to any other person, in relation to managing the public relation of such service receiver, in any manner.
The service provider may be any person i.e. may a an Individual, a firm, a company or any other form of organisation which is providing the service in relation to managing the public relation of any other person and that person who is receiving services may also be any person i.e. the Individual, Firm, company or any other formation.
3.GOVERNMENT CLARIFICATION
Public relation agencies are engaged to provide services relating to image or communication management. These services are proposed to be taxed. The term “public relations” is defined. - As written by Joint secretary, TRU, Ministry of Finance, Department of Revenue, in D.O.F. No. 334/4/2006- TRU, Dated 28-02-2006 to all commissioners, chief commissioner and DG.
4.RATE OF TAXABILITY
The tax on this service was imposed in 2006 by Notification 15/2006 dated 25th April 2006 and the effective date of taxability of this service is 01-05-2006 and the rate of service tax is 12%. Further 2% education cess is also payable on the amount of service tax hence the effective rate is 12.24%.
5. PERSON LIABLE TO TAX
Generally the Service tax is payable by the Service provider as per section 68 of the Finance Act-1994 though exceptionally this responsibility is given to the persons other than the service provider as per the provisions of Section 68(2) by issuing a Notification in this respect.
No such Notification has been issued under section 68(2) with respect to this service hence the liability of payment of service tax is of the “Service provider”.
Here the “person” providing the service with respect to managing the Public relations of the other person shall be responsible for payment of service tax.
6.VALUATION OF TAXABLE SERVICE
As per section 67 of the Finance Act-1994, the law governing the service tax in India, the value of taxable service shall the amount gross amount charged by the service provider for the service provided or to be provided by him.
Here explanation 3 added to the section 67 by Finance Act-2005 w.e.f.13-5-2005 to make the things more clear and according to it the Gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service.
Hence the advance received from the service receiver will also be taxable on the receipt basis.
7. EXEMPTIONS
(i). EXEMPTION TO SMALL SERVICE PROVIDERS
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The service providers whose aggregate value of service provided during the immediately preceding year does not exceed Rs.4 Lakhs are exempt from service tax in current year up to the receipt of Rs. 4 lakhs. This exemption is not available where the liability of payment of service tax is of persons other service provider. Here in this particular service the liability of payment of service tax is of Service provider hence the exemption is available but this exemption will not be available if the service provider is using the brand name of another person. This exemption is also subject to some conditions on allowability of Cenvat credit during the period of exemption – Notification No. 6/2005- Service Tax, dated 1.3.2005 applicable from 1st. April 2005.
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(ii). SERVICES PROVIDED TO UNITED NATIONS ETC
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-Servicesprovided to United Nations or any other International Organisations are totally exempt from service tax. – Notification No. 16/2002-ST, dated 21-11-2002.
- Some of the international organisations are WHO, ILO, Food and Agricultural Organisation of UNO, UNICEF, IMF, Universal Postal union, International Telecommunication union etc. – As declared by central Government in pursuance to Section 3 of the United Nations (Privileges and Immunities) Act, 1947.
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(iii). SERVICE PROVIDED IN SEZ
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-Serviceprovided to a developer or units (including units under construction) of Special Economic Zone (SEZ) for consumption of the services within the SEZ, subject to certain conditions, are exempt from service tax.
- The conditions in this respect are mainly related to the approval of the developer or units of SEZ by the concerned Board of approval but one condition is very interesting that the consumer of such service shall maintain the proper receipt or utilization account of said taxable service. It is surprising to see how the service provider who has to collect the service tax will ascertain that the service consumer will maintain such an account or not in future.
– Notification No. 4/2004-ST, dated 31-3-2004.
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8. DEPOSIT OF TAX
If the service provider is Partnership or proprietorship then the Liability of payment of service tax is quarterly and the service provider has to keep following dates in mind for this purpose: -
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PERIOD ENDING ON
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DUE DATE
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30TH JUNE
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5th JULY
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30TH SEPT.
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5TH OCT.
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31ST. DEC.
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5TH JAN.
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31ST.MARCH
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31ST. MARCH
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In case of other Assesses
(Other than proprietor or Partnership)
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5th Dayof the immediately following the month to which tax is related say For April: - 5th May, For May: - 5th June etc. but the tax for the Month of March has to be deposited by 31st. March itself.
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9. FLLING OF RETURNS
Returns are required to filed half yearly and the dates of filling are as under: -
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HALF YEAR
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DUE DATE
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30th SEPT.
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25TH OCT.
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31st. MARCH
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25TH APRIL
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12. RELEVANT CODES
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TAX COLLECTION
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00440374
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OTHER RECEIPTS1
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00440375
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DEDUCT REFUNDS2
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00440376
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EDUCATION CESS3
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00440298
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1.Other receipts are meant for Interest and penalty leviable on delayed payment of service tax.
2.Deduct refund is only for official use.
3.Here note that the education cess code for all the 15 new services is 004400298 instead of 00440297 as applicable to all the existing services.
END
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