SUPPLY OF SPACE FOR ADVERTISEMENT IN PRINT MEDIA – APPLICABILITY OF GST

[Mr. M. GOVINDARAJAN]

IN RE: M/S. TIME EDUCATION KOLKATA PRIVATE LIMITED - 2022 (7) TMI 750 - APPELLATE AUTHORITY FOR ADVANCE RULING, TELANGANA, the appellant is in the business of purchase and supply of advertisement space to the prospective customers. They are also supplying artwork to adorn the space.  The appellant sought Advance Ruling before the Authority for Advance Ruling, Telangana on the following questions-

• Whether the services supplied by the applicant can be termed as the supply of space for advertisement in print media?
• If yes, GST@ 5% can be charged on the invoices raised to the customers?
• Any consequential questions that may arise during the hearing.

The appellant does not charge for the artwork in certain cases.  The appellant was of the view that the activity of artwork by the applicant forms part of composite supply of advertisement space and artwork and therefore the total supply should attract tax @ 5% under HSN 998363.

The Authority for Advance Ruling examined the Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017.  The Authority for Advance Ruling observed that the said Notification makes a clear distinction between sale of mere advertisement space and ‘Other advertisement space’, which is having a separate SAC code i.e., 998366.  The appellant is supplying two different services and each is attracting different tariffs under this notification.  Therefore this will not amount to composite supply.

The Authority for Advance Ruling ruled that-

• The services supplied by the applicant fall under ‘Other advertisement space’, which is having a separate SAC code i.e., 998366.
• GST is leviable @18%

Being aggrieved by the ruling given by the Authority for Advance Ruling the appellant filed the present appeal before the Appellate Authority for Advance Ruling.

The appellant submitted the following before the Appellate Authority for Advance Ruling to prove his stand that the services rendered by him is a composite supply and is liable under the HSN Code  998363 which attracts 5% GST-

• The appellant’s business activity involves purchase of space in print media at a discounted rate for different regions and different parts of the newspapers i.e., Front page, Inside Cover Page, Inside Page Black & White and the space so procured is meant for sale to the applicant’s customers after adding the margin.
• The appellant will re-sell the space bought from the print media to the various advertisers after adding the margin. In some cases, applicant will also undertake the preparation of artwork, if required by the customer. There will be no extra amount charged for the artwork and the amount charged is same in all cases i.e., whether or not appellant provides the service of artwork, the price remains the same.
• Mere addition of ‘Art work’ with ‘Print media Advertisement space’ to be sold’ will not change the classification from HSN 998363.
• HSN 998366 covers only the ‘other type of Advertising space/time’ viz., Electronic Media, Billboards, Buildings etc., and not the other services rendered along with Print media advertisement space. 
• The impugned order also has not given any reason/basis to classify under HSN 998366.
•  If the supply comprising of the two or more supplies is ‘composite supply’ then the entire supply shall be assessed as ‘principal supply’ among them and the tax liability as applicable to ‘principle supply’ shall be applied to the entire supply. 
• Once the instant activity falls under the scope of ‘composite supply’ then tax liability shall be determined as applicable to the ‘principle supply’.
•  The appellant understands that in the instant case sale of space is the principal supply in the composite supply as the sale of space constitutes predominant element and the artwork is only ancillary and would be given as complimentary.
• The Ministry of Finance, vide their Press release dated 23.08.2017, clarified that if the advertisement agency supplies any service other than selling of space for advertisement, such as designing or drafting the advertisement, and such supply is not a part of any composite supply, the same would be liable to tax @18%. If such supplies are part of any composite supply, the rate applicable for the principal supply shall apply.
• The artwork by appellant forms part of composite supply as explained above and the principal supply is the sale of space for advertising thereby the present transaction is classifiable as ‘Sale of space for advertisement in Print media’ under HSN of 998363 and liable for GST @ 5%.

The appellant relied on the ruling given by the Authority for Advance Ruling, Uttarakhand IN RE : HARMILAP MEDIA (P) LTD. - 2020 (3) TMI 293 - AUTHORITY FOR ADVANCE RULING - UTTARAKHAND.  In this case the Authority for Advance Ruling ruled that ‘selling of space in print media’ constitutes the predominant element of a composite supply and designing/ composition of the advertisement is ancillary to the said composite supply. Accordingly, the composite supply comprises of selling of space in print media and designing/composing of the advertisement, will attract GST @ 5% inasmuch as ‘selling of space in print media’ is a principal supply which attract GST @ 5%”.

In view of the above the appellant prayed to set aside or modify the impugned ruling given by the Authority for Advance Ruling.

Personal hearing was given to the appellant.  The Appellate Authority for Advance Ruling considered the arguments put forth by the appellant and also the order passed by the Authority for Advance Ruling.  The Appellate Authority for Advance Ruling analyzed the HSN Codes-

• 998361 – Advertising services - This service code includes planning, concept development and execution of the full range of services for an advertising campaign, including creating the basic idea for an advertisement, writing the words and scenarios for advertisements, selection of media to be used, design of ads, illustrations, posters, etc., writing of scenarios for advertising movies, placement of advertisements in media; development and organization of direct marketing advertising campaigns, i.e. sending advertising and promotional messages directly to consumers through methods such as direct mail and telemarketing, rather than via mass media; aerial advertising services; delivery services of free samples and other advertising material; demonstration and presentation of advertising services at point of sale; sales promotion (if no orders are received).
• 998363 - Sale of advertising space in print media (except on commission) - This service code includes sale of advertising space in books, brochures, pamphlets, etc.; sale of advertising space in newspapers, journals and periodicals; sale of advertising space in postcards, timetables, forms, posters or other printed matter.
• 998366 - Sale of other advertising space or time (except on commission) - This service code includes:

• sale of advertising space on billboards, buildings, vehicles, etc.;
•  sale of advertising space in electronic media other than on-line;
• sale of advertising space in video and motion pictures (product placement);
•  sale of naming rights for tournaments, stadiums, etc.

The Appellate Authority for Advance Ruling observed that HSN 998366 relates to space other than print media, i.e., advertisements on Billboards, Buildings, Vehicles, Electronic media, and advertising in video & motion pictures. The activity of the appellants in the subject case is sale of advertising space in print media and is not on Bill boards, Buildings, Vehicles etc. Therefore, the findings of AAR and its ruling with regard to classification of service is not in consonance with the explanatory notes.

The Appellate Authority for Advance Ruling further observed that apart from selling the space for advertisement in print media, the appellant is also providing the services of designing or art work.   As seen from the explanatory notes under 998663, it is ‘sale of advertising space in print media’ which clearly notify that the vacant space or blank space is for the purpose of advertising only.   as the appellant is selling space and also providing design or art work, the activity cannot be called as mere selling of advertising space but ‘Advertising Service’ falling under HSN 998361.   Therefore, the concept of composite service for deciding the rate of tax cannot be applied to Advertising Service, which involves host of activities which have their own relevance and importance.

In such specialized services, the nature of service can be decided on the basis of contract or agreement and each contract may have different activities involved. The purpose of advertisement will also have impact on what kind of art work is required. The appellant has not submitted any contract or agreement which tells about the scope of activity involved in printing the advertisement within the given space in print media. Therefore the Appellate Authority for Advance Ruling held that any additional work or service provided to enhance the appearance of advertisement cannot be called as mere sale of advertising space in print media.

The Appellate Authority for Advance Ruling set aside the ruling given by the Authority for Advance Ruling with regard to classification of service under SAC 998366.  The Appellate Authority for Advance Ruling gave the following ruling in the present appeal-

• The services supplied by the applicant fall under ‘Advertising Services’, which is having a separate SAC code i.e., 998361.
• GST is payable @ 18% in terms of Serial No. 21 (ii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended.