Service Tax and Advertising Courier and Pager services — New procedure - Service Tax - Trade Notice No. 138/96 - Cochin

Attention is invited to this office Trade Notice No. 121/96, dated 31-10-1996 on Service Tax. The following further clarifications are issued on the subject. Advertising Agencies : 1. Service Tax is to be computed on the gross amount charged by the advertising agency from the clients for services in relation to advertisement irrespective of the fact that the advertising agency directly makes or prepares advertisement or gets it done through another person. However the amount paid by the advertising agency for space and time to print media or electronic media (i.e., newspaper, periodicals, Doordarshan, Private Television channels, All India Radio etc.) need not be included in the taxable value. However, the commission received by the advertising agency would be included in the value of taxable services. 2. The expenditure incurred on account of travel transportation, stay in hotel etc. in relation to advertisement by the advertising agency the value of taxable service should include the above said expenditure also. 3. The expenditure incurred on market research by the advertising agency is to be included in the value of taxable service. 4. The amounts paid directly by the clients to foreign Television channels in foreign currency are not to be included in the taxable service as the amounts are not charged by the advertising agency from the clients. 5. In many cases the advertising agency gets a documentary or film prepared by an independent film producer on behalf of the client. In such cases, the expenses incurred on getting the film or documentary produced on behalf of the client should be included in the value of taxable service by the advertising agency. In case the film producers choose to charge the client directly, then the film producers will be liable to pay Service Tax accordingly. 6. Even if the advertising agency fails to collect the Service Tax, the responsibility for payment of tax lies on the advertising agency only. Courier Agency : 7. Some Courier Agencies utilise the services of another company known as co-loaders for transit movement of goods, articles etc. The charges collected by co-loaders from courier agency, are ultimately recovered by the courier agency from the customers. Such charges are also to be included in the gross amount of taxable services. 8. In respect of door to door transportation of time sensitive documents, goods or articles, the gross amount charged by the courier agency from the customers would be the gross amount for taxable service. 9. Service Tax is chargeable on the documents, goods or articles sent abroad. However in respect of documents, goods, articles etc. received from abroad and delivered to a customer in India, no service tax is payable. 10. The courier agencies who undertake comprehensive business and provide integrated transportation, warehousing, packing, inventory management etc. the charges collected for such facilities are also to be included in the gross amount of taxable service. Pagers : The Service charge on paging service will be chargeable on the gross amount charged from the subscriber. General : 11. In order to have a uniform pattern in filing quarterly return in Form ST 3 / ST 3A all the new assessees (Advertising service, Courier service, Pager service) may file the first report for the period ending 31-12-1996 and on subsequent quarters ending March, June, September and December. 12. The advertising agencies (including hoarders) Courier agencies and `pagers shall deposit the tax collected to the credit of Central Government by 15 th of the following month as detailed in Trade Notice No. 121/96, dated 31-10-1996. What is actually collected as Service Tax has to be deposited to the account of the Central Government by the 15th of the next month and not the amount of tax payable on the bills raised in that month. However the legal liability to pay the tax on the bills raised during the month lies on them. 13. Attention of all advertising agencies, Courier agencies, `pager is also drawn to Sections 75 and 76 of Service Tax Act . If any person responsible for collecting Service Tax fails to credit the tax collected by him to the Central Government before the due date he is liable to pay an interest at the rate of 1.5% for every month or part of a month. Similarly penalty can also be imposed if a person responsible to collect the Service Tax fails to collect tax or having collected the tax fails to pay such tax to the credit of the Government before the due date. As such all persons who are authorised to collect the service tax are advised to be more careful in the collection of Service Tax and remittance to the Service Tax to the Government account in time.