2020 (10) TMI 1301 - AAR - GST

Classification of services - rate of GST - selling of Space for advertisement in print media - Advertising services and provision of advertising space or time - Advertising Services - Purchase or sale of advertising space or time, on commission - Sale of advertising space in print media (except on commission) - Sale of television and radio advertising time - Sale of internet advertising space - Sale of other advertising space or time (except on commission) - Value of supply in case trade discount/additional discount/agency commission is deducted in the invoices or not - designing/fabrication/production shall formed part of Composite supply or not - HELD THAT - In case the designing/fabrication/production is bundled with the services mentioned, then the same falls under 'composite supply' in as much as services of 'selling of space for advertisement' constitutes the predominant element and therefore becomes the principal supply and the designing/fabrication/production shall form the part of that composite supply as ancillary in as much as 'selling of space for advertisement' cannot be effectively accomplished without designing/fabrication/production. Thus such ancillary activities having a direct and proximal nexus with 'selling of space for advertisement'. Value of supply in case trade discount/additional discount/agency commission is deducted in the invoices raised in the name of the advertising agency by the TV / Radio/ Outdoor Company/ company - HELD THAT - In view of the legal provisions, the commission shall form the part of taxable value and discount of any kind is excluded from the taxable value subject to the fulfillment of the conditions laid down in the said legal provisions. Hence in-bills discounts and discount established vide agreement before the time of supply subject to the reversal of ITC by the recipient is allowable deduction from the value of the supply. Taxability on value/volume based discounts in form of credit notes after the date of invoice - HELD THAT - The registered person who had issued a credit note, can adjust his tax liability by following the procedure, subject to the condition that incidence of tax on such supply, has not been passed on to any other person, Thus, it is observed that when a supplier requires to decrease the taxable value of a supply, he has to issue a credit note to the recipient and accordingly can reduce his tax liability for the concerned period provided that he has neither charged or collected tax on such supply. Benefit of Notification No, 12/2017-Central Tax (Rate) dated 28.06.2017 (as amended from time to time) in respect of the supply made by the advertising agency - HELD THAT - Technical Officer (TRU) vide letter F.NO. 254/90/2018-TRU dated 03.05.2018 addressed to Joint Commissioner, CCO, Delhi Zone, New Delhi has clarified that the services provided by the DAVP approved agencies on campaign for creating awareness for prevention of diseases to the Health Department is covered under the said notification in as much as 'Public Health' is a function entrusted to local authority under Article 243W read with the Twelfth Schedule S.No. 6 - the advertising agency providing services to the Central Government, State Government, Union territory or Local Authority or a Government Authority in relation to any function entrusted to a panchayat under article 243G of the Constitution or in relation any function entrusted to a Municipality under article 243 W of the Constitute are exempted from payment of GST subject to the fulfilment of the conditions. Supply made by the Radio/TV/outdoor/Internet/Telecom/any other advertiser to the advertising agency - HELD THAT - The supply is also exempt from GST in terms of Notification No. 12/2017-Central Tax(Rate) dated 28-06-2017(as amended from time to time) - such exemption is also extended to Radio/TV/outdoor/Internet/Telecom/any other advertise, if such specified services has been provided in terms of S.No. 3A under Chapter-99 issued vide notification No. 2/2018 Central Tax (Rate) dated 25.01.2018.

Summary

Issues Involved
1. Classification and tax rate on various modes of agreements for advertising services.
2. Classification and taxability when designing/fabrication/production is bundled with the services.
3. Value of supply in case of trade discount/additional discount/agency commission.
4. Taxability of cash discount received by the advertising agency.
5. Taxability of value/volume-based discount received in the form of credit notes after the date of invoice.
6. Exemption from GST for services provided to government entities under specified conditions.
7. Exemption from GST for services provided by Radio/TV/Outdoor/Internet/Telecom/other advertisers to the advertising agency under specified conditions.

Detailed Analysis

1. Classification and Tax Rate on Various Modes of Agreements
The judgment addresses the classification and tax rate on different modes of agreements for advertising services. The classification and rate of tax are determined based on Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, which specifies the following:
- Advertising services and provision of advertising space or time fall under Group 99836.
- Different sub-categories include:
- 998361: Advertising Services
- 998362: Purchase or sale of advertising space or time, on commission
- 998363: Sale of advertising space in print media (except on commission)
- 998364: Sale of television and radio advertising time
- 998365: Sale of internet advertising space
- 998366: Sale of other advertising space or time (except on commission)

2. Classification and Taxability When Designing/Fabrication/Production is Bundled
When designing/fabrication/production is bundled with the advertising services, it forms a composite supply. According to Section 2(30) and Section 8 of the CGST/SGST Act, 2017:
- Composite supply is when two or more taxable supplies are naturally bundled.
- The principal supply is the main service, and ancillary services are included.
- The tax rate for the composite supply is the same as that of the principal supply, which is 'selling of space for advertisement'.

3. Value of Supply in Case of Trade Discount/Additional Discount/Agency Commission
Section 15 of the CGST/SGST Act, 2017 deals with the value of taxable supply:
- The value of supply is the transaction value, which is the price paid or payable.
- The value includes any taxes, duties, incidental expenses, and subsidies linked to the price.
- Discounts given before or at the time of supply and recorded in the invoice are excluded from the taxable value.
- Discounts given after supply, if established by agreement and linked to relevant invoices, are also excluded, subject to the reversal of input tax credit by the recipient.

4. Taxability of Cash Discount
The taxability of cash discounts follows the same provisions as other discounts under Section 15. If the conditions for discounts are met, the cash discount is excluded from the taxable value.

5. Taxability of Value/Volume-Based Discount in Form of Credit Notes
Section 34(2) of the CGST/SGST Act, 2017 allows for the adjustment of tax liability through credit notes:
- Credit notes must be declared in the return for the month they are issued, but not later than September following the end of the financial year or the date of the annual return, whichever is earlier.
- The tax liability can be adjusted provided the incidence of tax has not been passed to any other person.

6. Exemption from GST for Services Provided to Government Entities
Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 exempts certain services from GST:
- Pure services provided to the Central Government, State Government, UT, or local authority related to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W are exempt.
- Composite supply of goods and services, where the value of goods does not exceed 25% of the total value, provided to government entities for specified functions, is also exempt.

7. Exemption from GST for Services Provided by Other Advertisers to the Advertising Agency
The exemption under Notification No. 12/2017-Central Tax (Rate) extends to services provided by Radio/TV/Outdoor/Internet/Telecom/other advertisers to the advertising agency if they meet the specified conditions.

Conclusion
- Selling of space for advertisement in print media attracts GST at 5%, while other cases attract 18%.
- The classification of services follows the scheme outlined in Notification No. 11/2017-Central Tax (Rate).
- Composite supplies involving designing/fabrication/production are taxed at the rate applicable to the principal supply.
- Discounts are excluded from the taxable value if conditions are met.
- Tax liability can be adjusted through credit notes as per Section 34(2).
- Services provided to government entities for specified functions are exempt from GST.
- Services provided by other advertisers to the advertising agency are also exempt under specified conditions.