Service tax on advertising agency

Finance Act, 1995

47.2 In order to subject payments in respect of advertising contracts, broadcasting contracts, telecasting contracts, transport contracts and catering contracts to the requirement of deduction of income-tax at source, the Act amends section 194C by providing that the expression ‘work’, used therein, shall also include (a ) advertising, (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting, (c) carriage of goods and passengers by any mode of transport other than by railways, and (d) catering. While the deduction of tax shall be at the rate of two per cent of the amount in regard to items (b), (c) and (d ) above,

it shall be at the rate of one per cent in the case of an advertising contract. The deduction in regard to item at (a ) above shall apply when a client (i.e., an advertiser) makes payment to an advertising agent.

When an advertising agency makes payments to their models, artists, photographers, etc., tax shall be deducted by it under section 194J of the Income-tax Act at the rate of five per cent as applicable to fees for professional and technical services.

There will, however, be no tax deduction at source when an advertising agent makes payment to the print or electronic media.

In this case your Co. act as an agent as per ST Provisions, made payment to Eenadu & Nam. Tel. on behalf of your clients for Advertising in News Paper. Then there is no need to deduct TDS for Payments made by Be Positive to TOI (Bennett & Coleman Co. Ltd.)