Service tax on Advertising Agency - Service Tax - 64/13/2003

This Circular has been rescinded by Circular No. 93/4/2007-ST, Dated: May 10, 2007 Circular No. 64/13/2003-ST, Dated Oct 28, 2003 Service tax on Advertising Agency The representations have been received in this office with regard in the leviability of Service Tax under the category of Advertising Agency Services in respect of persons agencies engaged in canvassing for advertisements for which they get commission from the publishers. The persons involved do not provide any service like making, preparing, displaying and exhibiting and only undertake canvassing for the advertising. 2. The term canvassing may merely invoice contacting potential advertisers and persuading them to give advertisement to a particular newspaper/periodical/magazine. The making and preparation of the advertisement namely, drafting of the text, preparation of layout is left either to the advertiser or to newspaper/ periodical /magazine. Such a service is known as 'space selling'. In such cases, since the agency undertakes the job of merely bringing the order for an advertisement and does not undertake any further activity, it would not fall within the definition of advertising agency and will not be subjected to service tax. 3. On the other hand, 'canvassing' may involve such agency approaching a customer, receiving the texts of the advertisement (including photographs, monograms etc. of the customs), estimating the space that such advertisement would occupy in the newspaper/periodical/magazine, negotiating the price, informing the general layout of the advertisement, that would finally appear in such newspaper etc. In such cases the term 'canvassing' would certainly fall within the phrase 'any service provided in any manner connected to making preparing, displaying and exhibiting' and would be taxable service.' 4. In view of above, I have been directed to say that if the canvassing is limited to space selling then such services would not be liable to any service tax. However, if canvassing is involving receiving the text of advertisement, estimating the space that such advertisement would occupy in the newspaper/periodical/magazine, negotiating the price, forming the general layout of the advertisement that would finally appear in the newspaper then such activity would be liable to service tax under the category of Advertising Agency Services.