NO SERVICE TAX ON SELLING OF SPACE OR TIME SLOTS FOR ADVERTISEMENTS

[Dr. Sanjiv Agarwal]

Clause (g) of Section 66(D) of Finance Act, 1994 stipulates that "Selling of Space or Time Slots for Advertisements other than Advertisements Broadcast by Radio or Television" shall be in the Negative List and as such, no Service Tax will be levied.  

This entry in negative list should qualify the following tests –

a)  involves selling of space (in case of print media),

b) involves selling of time slots (in case of electronic media),

c) purpose of selling time slots/space to be for advertisements (publicity/sales promotion, awareness etc.),

d) excludes broadcast by radio or television (i.e., broadcast will be taxable). 

Broadcasting per se is not is negative list. Sale of space or time for advertisement to be broadcast on radio or television and sale of time slot by a broadcasting organization shall be taxable.

‘Advertisement’ has been defined in section 65B(2) of the Act as form of presentation for promotion of, or bringing awareness about, any event, idea, immovable property, person, service, goods or actionable claim through newspaper, television, radio or any other means but does not include any presentation made in person. 

Broadcasting under Section 2(c) of Prasar Bharti (Broadcasting Corporation of India) Act, 1990 is defined as under — 

“the dissemination of any form of communication like signs, signals, writings, pictures, images and sounds of all kinds by transmission of electro-magnetic waves through space or through cables intended to be received by the general public either directly or indirectly through the medium of relay stations and all its grammatical variations and cognate expressions shall be construed accordingly”.

Thus, the essential features of broadcasting are –

i)  There must be dissemination of sign or signals, writings, pictures, images and sounds.

ii) Communication should be through electro-magnetic waves through space or through cables.

iii) Communication is intended to be received by general public.

iv) The communication may be received either directly or indirectly.

v) The communication is received through the medium of relay stations. 

Sale of space of time for advertisements not including sale of space for advertisement in print media and sale of time by a broadcasting agency or organization is currently taxed under clause (zzzm) of sub-section (105) of the Finance Act, 1944. 

In the earlier definition, “sale of space or time for advertisement” included —

(i)  providing space or time, as the case may be, for display, advertising, showcasing of any product or service in video programmes, television programmes or motion pictures or music albums, or on billboards, public places, buildings, conveyances, cell phones, automated teller machines, internet;

(ii)  selling of time slots on radio or television by a person, other than a broadcasting agency or organisation; and

(iii) aerial advertising.

Explanation 2.— For the purposes of this sub-clause, ‘‘print media’’ means,—

(i) “newspaper’’ as defined in sub-section (1) of section 1 of the Press and Registration of Books Act, 1867;

(ii) ‘‘book’’ as defined in sub-section (1) of section 1 of the Press and Registration of Books Act, 1867, but does not include business directories, yellow pages and trade catalogues which are primarily meant for commercial purposes.

According to CBEC (vide TRU Letter No. 334/1/2012 dated 16.3.2012), non-taxable services include —

a) Sale of space for advertisement in print media,

b) Sale of space for advertisement in billboards, public places, buildings, conveyances, cell phones, automated teller machines, internet,

c) Aerial advertising,

d) presentation made in person.

Services provided by advertising agencies relating to preparation of advertisements will not be covered in the negative list relating to sale of space for advertisements. Services provided by advertisement agencies relating to making or preparation of advertisements would not be covered in this negative list entry and would thus be taxable. This would also not cover commissions received by advertisement agencies from the broadcasting or publishing companies for facilitating business, which may also include some portion for the preparation of advertisement. taxmanagementindia.com

In this service, there could be cases of bundled service (composite services). In case a person provides a composite service of providing space for advertisement that is covered in the negative list entry coupled with taxable service relating to design and preparation of the advertisement, its taxability be determined as follows —

• This would be a case of bundled services taxability of which has to be determined in terms of the principles laid down in section 66F of the Act.
• Bundled services have been defined in the said section as provision of one type of service with another type or types of services.
• If such services are bundled in the ordinary course of business then the bundle of services will be treated as consisting entirely of such service which determines the dominant nature of such a bundle.
• If such services are not bundled in the ordinary course of business then the bundle of services will be treated as consisting entirely of such service which attracts the highest liability of service tax.

= = = = = = =

Discussions to this article

[ROHAN THAKKAR]

Sir,

Thanks for the useful Information..

 

As there is no service tax on selling of space or time other than radio and televition, in this regard, kindly guide me on the undermentioned case.

Suppose a company (say X Ltd) has 1500 hoarding for the purpose of advertisement. It has given contract for display of advertisement to an agency say Y Ltd. Y ltd has to pay fixed say Rs 10,00,000 to X ltd.

In this regard, which person is said to have sold the space? X Ltd is the owner, it appears that the consideration received by X Ltd is exempt because it has sold the space.

Y will get the advertisement from their client. Y may be able to recover an amount less than 10 lakhs or more than 10 lakhs; is service tax leviable on consideration received by Y Ltd. If yes, then is it on the entire amount received by Y Ltd or some other amount?

If any one wants to place their advertisement on the hoardings owned by X Ltd, in that case one has to approach only Y Ltd because it is Y Ltd which has got all the rights for putting advertisement because tendet is in their favour. There is Mr A, who is working as an advertisement agent. For putting an advertisement on the hoarding of X Ltd, Mr A charges Rs 50,000 from client and gives 40,000/- to Mr Y. In this regard, following questions are emerging

• Whether service tax is leviable on the activity done by Mr A?
• If Yes, it is leviable on what amount, Rs 10,000 (50,000-40,000) representing as commisison; or on Rs 50,000/-.
• If Mr A does not show commission separately, then there are two services involved; one is commission and other is towards advertising. In this case, can it be treated as artificial bundling and service tax is levied on entire consideration received by Mr A or otherwise.

 

Sir, for the above, kindly provide your valuable inputs.

 

With Respect and Regards,

 

Rohan Thakkar

[Rupesh Girap]

Dear Sir

 

Thanks for the valuation information. Could you please advise me on the CPL campaign cost. CPL is cost per lead that is generated in these activities. Does the CPL attract service tax??? There is lot of confusion on this... hence seeking advice.

 

Thanks

Rupesh