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         Advertising Agencies
   
 
Q.1 What is an Advertising Agency? What is the taxable service with regard to advertising?
Ans. Advertising agency is any commercial concern engaged in providing any services connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant. Services provided to a client by advertising agency in relation to advertisement in any manner are defined to be the taxable services. 
Q.2 What is the value of taxable service in case of Advertising Services?
Ans. The value of taxable services in relation to service provided by an advertising agency to a client is the gross amount charged by such agency from the client for services in relation to advertisements. This 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.) are not includible in the value of taxable service. 
Q.3  Are the expenses incurred by the advertising agency on account of travel, transportation and stay in hotels etc. excludible for computing the value of taxable service?
Ans. 
 
 
No. Since the value of taxable service is the gross amount charged by the advertising agency in relation to the services rendered to his client, the charges on account of travel, transportation and hotel stay, which form part of the bill correctly forms part of the value of the taxable service.
Q.4 
  
Are the expenses incurred by Advertising Agency in doing market survey/research excludible from value of taxable service?
Ans. No, If the market Survey / Research relates to the advertisement, and all expenses are charged from the client on this account, they are correctly includible in the value of taxable service.
Q.5 Is Directorate of Audio and Visual Publicity (DAVP) in the Ministry of Information and Broadcasting liable to pay Service Tax on the services rendered by it to various Departments of the Central Government in relation to Government Advertising?
Ans. No. 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.
Q.6 Is it true that when advertisement is released directly in the newspapers by a client (i.e. not through an advertising agency), no Service Tax is levied while the same advertisement is released in the news paper through advertising agency on behalf of the same client, the Service Tax become leviable on the commission of the Advertising Agency ? If so what is the reason for this distinction?
Ans. In case of direct advertising by the clients, no service is being provided, hence no Service Tax would be payable. However in cases where the advertisement is released through Advertising Agencies, a service has been rendered by the latter. Hence, the Service Tax would be leviable on the agency charges of the Advertising Agency, not on the total charges recovered from the clients.
Q.7 In the case of service provided by advertising agency, is Service Tax liable to be paid on the total cost of printing undertaken on behalf of advertising agency, charged by the printer from the advertising agency or is any deduction allowed to the advertising agency , on the expenditure due to the cost of paper and printing?
Ans.. Yes, 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
Q.8  Is there any exemption from payment of Service Tax on services provided by the Advertising Agencies?
Ans Yes, the services provided by the Advertising Agencies to United Nations, certain International Organisations and specified Diplomatic Missions are exempted from payment of service tax.
( Authority : Notification no. 45/98 dated 22/01/98 , 44/98 dated 22/1/98, 47/98 ST dated 24/4/98)
Q.9  Can Cinema theatres be treated as advertisement agencies as they project advertisement ? 
Ans The Cinema theatres cannot be treated as advertisement agencies as they project advertisements only on behest of advertising agencies.  Further it has already been clarified that the amount paid by advertising agency for space and time in getting the advertisement published in print media (i.e. newspapers, periodicals etc), or the electronic media (Doordarshan, Private T.V. Channels, AIR, Cinema theatres etc) will not be includible in the value of taxable service for the purpose of levy of Service Tax. 
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