|| What is an Advertising
Agency? What is the taxable service with regard to advertising?
|| 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.
|| What is the value
of taxable service in case of Advertising Services?
|| 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.
|| Are the expenses
incurred by the advertising agency on account of travel, transportation
and stay in hotels etc. excludible for computing the value of
| 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.
| Are the expenses
incurred by Advertising Agency in doing market survey/research
excludible from value of taxable service?
|| 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.
|| 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?
|| 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.
|| 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?
|| 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.
|| 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?
|| 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
|| Is there any exemption
from payment of Service Tax on services provided by the Advertising
|| 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)
|| Can Cinema theatres
be treated as advertisement agencies as they project advertisement
|| 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.