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TMI Blog2016 (5) TMI 456X X X X Extracts X X X X X X X X Extracts X X X X ..... dia inventory on its own account to the advertiser, incidental receipt of incentives/volume discounts from Media Owner shall not be considered to be providing a service, as defined under the Finance Act, 1994, to the Media Owner and shall not be liable to Service Tax. In both the Models, there is no service tax liability. - Ruling No. AAR/ST/11/2016, Application No. AAR/44/ST/31/2013 - - - Dated:- 22-4-2016 - V. S. Sirpurkar (Chairman), Shri S. S. Rana (Member) And Shri R. S. Shukla (Member) For the Applicant : Shri Prakash D. Shah, Advocate For the Respondent : Shri Amresh Jain (AR) RULING M/s AKQA Media India Pvt. Ltd (hereinafter also referred to as applicant) intends to carry out the activity of an advertising agency, whereby it shall provide professional services to its clients (i.e. Advertisers) in relation to placement of advertisements on various medium. Further, the applicant intends to charge commission from such clients as a consideration for provision of its services. While the applicant shall provide services only to Advertisers, depending on the quantum of its advertisements placed by the applicant on various medium, the applicant could be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and release order. Advertising Agency points out any deviation in the display of the advertisement to the Media Owner and the Advertiser. Step 7-Receipt of invoice from media vendor: The Media Owner raises its invoices for the cost of the media inventory sold on the advertiser and hands over the said invoice to the Advertising Agency. The invoice typically proves the following details: a) Name of the Advertiser b) Details of the advertisement displayed c) Name of the Advertising Agency involved d) Costs of advertisement placed (less agency commission) e) Service Tax(including cess, if any) on the cost of advertisement placed (other than non-taxable media such as print media) Advertising Agency makes the payment for the media inventory to the Media Owners on behalf of the Advertiser after retaining its commission. The Media Owner pays the service tax (including cess, if any) on the invoice value (less commission of Advertising Agency). Step 8- Raising of invoice by Advertising Agency: Advertising Agency further raises an invoice on the Advertiser for its fee / agency commission plus applicable service tax (including cess, if any) thereon (the same is ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvertiser finalises and approves the media plan prepared and submitted by the Advertising Agency. Step 4- Issuance of Estimates by Advertising Agency: Based on the approved media plan, the Advertising Agency issues an estimate to the Advertiser for the costs of the advertisements (which include the margin of the Advertising Agency) for its approval. Step 5- Issuance of Release Order by Advertising Agency: Based on the approved estimates, Advertising Agency issues a release order on various media owner, for placement of the advertisement. Step 6- Monitoring of campaign: Advertising Agency monitoring the display of the advertisement on the various media in order to ensure that the media campaign is being executed as per the approved media plan, estimate and release order. Advertising Agency points out any deviation in the display of the advertisement to the Media Owner and the advertiser. Step 7- Receipt of invoice from media vendor: The Media Owner raises its invoice for the cost of the media inventory sold on the Advertising Agency. The invoice typically provides the following details: a) Name of the Advertising Agency b) Name of the Advertiser c) D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vertiser, will incidental receipt of incentives/volume discounts from Media Owner shall be considered to be providing a service, as defined under the Act, to the Media Owner and shall the same be liable to Service Tax? Question 3 In case, it is considered that the applicant is providing any service to the Media Owner, in the course of providing advertisement placement services to its client, then on what value should the Service Tax be applicable under the Act? 3. Applicant inter-alia submits that the incidental receipt of incentives / volume discounts by the applicant from the Media Owners are gratuitous payment and not for providing services; that no service tax is payable on such incentives; that the applicant does not enter into any contract for provision of service with the Media Owners; that the applicant places the order on behalf of the Advertiser; that the Advertiser is liable to pay the cost of the advertisement to the Media Owners and the agency commission to the applicant; that the applicant pays service tax on the agency commission received by it from the advertiser; that the applicant submits that no service is provided or agreed to be provided by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the applicant for the services provided to the Media Owner is liable to Service Tax. Revenue further submits that reasons for this conclusion that invoices from Media Owner only mentions the name of the applicant, thus there is contractual relationship for provision of service between the applicant and Media Owner; that entire amount payable to Media Owner in respect of media is to be paid by the applicant; that the applicant is to receive separate amount as consideration for the services provided to the Advertiser. 7. As far as Business Model 2 is concerned, Revenue submits that applicant is to sell media inventory on his own account to the Advertiser; that in such a case, applicant need to discharge Service Tax liability on the total sale price invoiced to the Advertiser. Revenue concludes that in this Business Model 2 also, applicant is required to pay Service Tax on the amount received from the Media Owner treating said amount as consideration for the services provided. 8. In relation of Question No. 3 raised by the applicant, Revenue submits that unless the terms of the contract are known, it is not possible to offer specific comments. 9. It is observed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue submits that applicant sells media inventory on his own account to the Advertiser; that in such case, applicant needs to discharge Service Tax liability on the total sale price invoiced to the Advertiser; that applicant is entitled to avail CENVAT credit of Service Tax paid to the Media Owner for purchase of media inventory. Applicant has confirmed that they would be paying Service Tax (including cess, if any) on the gross amount charged to the Advertiser for the media inventory (except non-taxable media such as print media); that Advertising Agency would take credit of Service Tax paid by the Media Owner on taxable invoice issued in the name of Advertising Agency. Based on the above assumptions, which have been found to be factually not correct, Revenue concludes that applicant is required to pay Service Tax on the amount received from Media owner treating said amount as consideration for services provided. The question raised by the Revenue are based on incorrect appreciation of facts, the subject question does not survive. 12. Revenue further submits that as per Section 65B of Finance Act, 1994, Service has following ingredients; a) any activity b) by one person fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of Media Owners. Applicant is not carrying out any activity to promote any Media Owner s business. Further, which Media Owner is to be engaged, is the decision of the advertiser and not of the applicant. Therefore, applicant cannot be said to provide promotion or marketing services to Media Owners. 15. It has been brought to our notice that Jurisdictional Commissioner of the applicant has issued Order-in-Original No. 08 / ST-VI/RK/2015 dated 15.01.2016 in M/s Group M. Media India Private Limited wherein he himself has held that volume discount / incentive is not liable to Service Tax. 16. Further, in M/s Grey Worldwide India Private Ltd., [2014-TIOL-1650-CESTATEMUM], Tribunal held that media giving certain incentives by way of volume discounts cannot be levied to Service Tax. Relevant portion of the Judgment is reproduced below: Thereafter, at the end of the year, depending upon the volume of business given by the advertising agency, the media gives certain incentives by way of volume discounts/rate difference. There is no agreement or understanding or any contract between the advertising agency and the media for promotion of the media s business activities. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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