SERVICE TAX ON ADVERTISEMENTS

A PROJECT

ON

SERVICE TAX ON ADVRTISEMENTS

SUBJECT: INDIRECT TAXES

SUBMITTED TO: : Mr.GANESH PANDEY SUBMITTED BY: JITENDER KUMAR ROLL -121

CHANAKYA NATIONAL LAW UNIVERSITY, PATNA.

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ACKNOWLEDGEMENT

I take this opportunity to express our humble gratitude and personal regards to : guidance from time to time during the course of this project work on the topic.

Mr. Ganesh Panday

for inspiring me and guiding me during the course of this project work and also for his cooperation and

The Present Project Report is attempted to explain for the benefit of the general readers. Dealing with this topic in a material form has naturally involved a great deal of compression and omission of many matters of interest. We hope that my selection of material will give a fair outline of the general picture.

EXPRESS

MY

GRATITUDE TO THE FACULTY OF,

LAW

OF

INDIRECT TAXES

FOR THE CONCEPTS

GIVEN BY HIM IN THE SUBJECT WHICH HAS BEEN THE BASE FOR THIS SMALL PIECE OF WORK .

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RESEARCH METHODOLOGY
AIMS AND OBJECTIVES: The aim of the project is to present a detailed study of the topic SERVICE TAX ON ADVERTISEMENTS through decisions and suggestions and different writings and articles.

SCOPE AND LIMITATIONS: Though the topic SERVICE TAX ON ADVERTISEMENTS is an immense project and pages can be written over the topic but because of certain restrictions and limitations I was not able to deal with the topic in great detail.

SOURCES OF DATA: The following secondary sources of data have been used in the project1. Articles/Journals 2. Books 3. Websites

METHOD OF WRITING AND MODE OF CITATION: The method of writing followed in the course of this research paper is primarily analytical. The researcher has followed Uniform method of citation throughout the course of this research paper.

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TABLE OF CONTENTS
TOPIC PAGE NO.
1.

ACKNOWLEDGEMENT................................................. ...............2 RESEARCH METHODOLOGY....................................................3 INTRODUCTION.......................................................... ...................5 SERVICE PLEA AGAINST TAX SERVICE TAX ON ON OF OF BANNER OR HOARDING LIABLE TO

2.

3.

4.

ADVERTISEMENT...6
5.

BROADCASTING........14
6.

MANNER MAKING SERVICE

PAYMENT..............................................................16
7.

TAX........................................................................... .......................18
8.

EXEMPTION EXCLUSION.......................................................20 PROCEDURE FOR OBTAINING A SERVICE

& TAX

9.

REGISTRATION.....21
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10. CONCLUSION.........2

2
11.

BIBLIOGRAPHY.......................................................... ..................23

INTRODUCTION
Service tax and GST are taxes of 21st century. Service tax is tax on the transaction of providing a service for consideration. Service tax was imposed for first time on 3 services w.e.f. 1-7-1994 and its scope is increasing every year. The Central Government has imposed service tax in terms of residuary entry no. 97 in the Union list in accordance with provisions contained in Article 265 of the Constitution. Service tax is not payable if service is provided in J&K. Service tax is payable under Finance Act, 1994, on about 109 taxable services as defined in section 65(105) of Finance Act, 1994. Service provided or to be provided is taxable event. Thus, service tax is payable when advance is received. Service tax is levied on specified taxable services and responsibility of payment of the tax is cast on the service provider. System of self-assessment of Service Tax Returns by service tax assessees has been introduced w.e.f. 01.04.2001. The jurisdictional Superintendent of Central Excise is authorized to cross verify the correctness of self assessed returns. Tax returns are expected to be
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filed half yearly. The service tax is administered by excise department. Adjudication order is issued by excise officer. Order passed by Central Excise Officer can be rectified by him within two years. Only mistake apparent from records can be rectified. Central Excise offices are authorized to conduct surveys to bring the prospective service tax assessees under the tax net. Directorate of Service Tax at Mumbai over sees the activities at the field level for technical and policy level coordination. Sections 64 to 96 of the Finance Act, 1994, as amended from time to time provide the legal basis for the levy and collection of Service Tax. The Finance Act (2) 1996 enlarged the scope of levy of Service Tax on advertising agencies, courier agencies and radio pager services. But tax on these services was made applicable from 1st November, 1996. The Finance Acts of subsequent years further extended the scope of service tax to cover a larger number of services

SERVICE TAX ON ADVERTISEMENT

There are two sections under Service Tax Act which cover services related to advertisements. These are:
i.

Advertising services[Section 65(105)(e)] Space selling Service [65(105)(zzzm)]

ii.

Section 65(105)(e) defines taxable service for advertising service as, "Taxable service means any service provided or to be provided to a client, by an advertising agency in relation to advertisements in any manner. First of all this section is applicable on advertising agency which a newspaper or magazine is not. Secondly service tax under this section is not payable for the actual making or display or exhibition of advertisement, but on the service connected with these activities. So, there is no service tax payable on advertisement charges paid to print media by advertising agency or the advertiser.
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Section [65(105)(zzzm)] talk about Space selling Service. Space selling service came into service tax fold from 1/5/2006. The taxable service defined under section 65(105)(zzzm) in following words taxable service means any service provided or to be provided to any person, any other person, in relation to sale of space or time for advertisement, in any manner, but does not include sale of space for advertisement in print media and sale of time slots by a broadcasting agency or organisation. Therefore, the print media is out of service tax for advertisements appearing in it. Service requires two parties. One cannot give service to himself. Service tax cannot be levied on value of goods. General rate of service tax is 10.30% (including education cess and SAH education cess) w.e.f. 24-2-2009 [During period 11-5-2007 to 23-2-2009, it was 12.36%]. Service tax is payable by service provider. In few cases, tax is payable by service receiver, under reverse charge method [Section 68(2)]. Service tax is payable on gross amount charged for service provided or to be provided [section 67] (excluding material cost). Tax is payable on reimbursement of expenses which are part of service, but not on payments made by service provider as pure agent of service receiver. If value is not ascertainable, valuation can be on basis of similar service or on basis of cost. Gross amount charged is taken as inclusive of service tax and then tax should be calculated by making back calculations. Service tax is payable only when bill amount is received from service receiver. However, in case of service provided to associated enterprises, service tax is payable as soon as book entry is made. Small service providers whose total value of services provided (including exempt and non-taxable services) is less than Rs 10 lakhs in previous year are not required to pay service tax in current financial year till they reach turnover of Rs 10 lakhs. The exemption is not available if service is provided under brand name of other person. Services provided to SEZ unit or developers for consumption within SEZ are exempt. Services provided by RBI are exempt but services provided to RBI are not exempt. The Hon'ble Supreme Court while deciding the case of M/s. Laghu Udyog Bharati v/s. UOI1, observed as follows :1

(1999 (89) ELT 247)

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"The service tax levied by reason of services which are offered. The imposition is on the person rendering the service. Of course, it may be indirect tax, it may be possible that the same is passed on to the customer but as far as the levy and assessment is concerned, it is the person rendering the service who alone can be regarded as an assessee and not the customer. This is the only way in which the provision can be read harmoniously. The Hon'ble Apex Court further opined that "The charge of tax is on the value of services and it is only the person who is providing service can be regarded as an assessee. The rules, therefore, cannot be so framed which do not carry out the purpose of the Chapter (Statute) and cannot be in conflict with the same." A number of trade bodies and individual service providers have challenged the levy of service tax by the Union Government under the residuary entry No.97, list I in VIIth Schedule of the Constitution. They contended that the service tax is nothing but a tax on professions, which is specifically listed, in the State list. Therefore, the Union Government is not empowered to levy service tax on professional services. Additionally, the levy has also been challenged on the grounds of hostile discrimination vis--vis other services and the service providers within the same category. The Institute of Architects and certain representative bodies of Chartered Accountants have been in the forefront of this litigation. However, this challenge has not found favour with the courts. The Gujarat High Court in its judgement dt.27.12.2000 (in SCA No.469/1999 and 7220/1999) and the Mumbai High Court in the judgement dt. 22.02.2001 (in the W/P no. 142/1999 and 1174/2000) have held that the tax on profession (which is in the State list) is a tax on the privilege of carrying on such profession. Therefore, such a tax is irrespective of the fact whether professional does or does not render professional service for remuneration. Whereas the service tax is a levy, which has to be paid each time a professional renders services for remuneration. Thus, professional tax and service tax are different in pith and substance. Further, the legislature is competent to identify and reasonably discriminate between various services and service providers

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for the purposes of taxation. Therefore, there is no ground to challenge the levy on the grounds of discrimination. Service provider is liable to issue invoice, bill, challan within 14 days from providing of service. But, if payment for that service is received in advance then invoice must issued within 14 days of receiving of that advance. That invoice should be serially numbered, and it should contain the details of service provider, receiver of service and service provided. The classification of services will be determined according to terms specified in various subclauses of section 65(105). If prima facie, a taxable service is classifiable under two or more subclauses of section 65(105), classification shall be effected as per following rules : (a) Specific description to be preferred over a general description (b) Classification should be as per essential character in case of composite services (c) Service which appears earlier in list, if service cannot be classified on above basis. Advertisement was one of the first services to be brought into the service tax net. Since then, it has turned out to be one of the most important services apart from being blockbuster revenue grosser for the Government. The initial notion was that the levy was only on pure play advertising agencies which spilled colours to make out an advertisement. This was further strengthened through judicial decisions, such as the one in Commissioner v. Team UPD Ltd2, wherein it was held that mere selling of space could not be amount to providing a service. But Circular No F.No.341/43/2005-TRU changed this impression, stating that an advertising agency obtaining space and time in getting an advertisement published in any sort of media would be a taxable service. The argument was that the services provided by the media were actually received by the advertising agency and used as an input service for providing the taxable service to the client.

2005 179 ELT 469

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Advertising agency means any commercial concern engaged in providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant. (Section 65(3) of Finance Act, 1994 as amended) Taxable Event And Scope Of Service: Taxable Service means any service provided to a client by advertising agency in relation to advertisement in any manner. (Section 65(72)(e) of Finance Act, 1994 as amended) Value of Taxable Service: The value of taxable services in relation to service provided by an advertising agency to a client shall be the gross amount charged by such agency for services rendered in relation to advertisements.(Section 67 of Finance Act, 1994 as amended) Advertising agencies negotiate the rate and other terms and conditions with the media for obtaining the space for advertisement. Advertising agency and the media are the two parties involved in the transaction and contractual obligations exist only between the two. The ad agency, as per the contract, is responsible for paying the amount to the media for getting the advertisement published. The client is not party to the transaction or contract with the media and, hence, does not have any legal obligation towards the media in relation to the said transaction. The transaction between the advertising agency and the media is on principal-to-principal basis. The ad agency is not acting as an agent of the client in such transactions. The service provided by the agency to its client is a composite and single service and use of advertisement space as an input service cannot be treated independently as a service separately provided on client's own account. There is no legal requirement for the advertising agency to specifically mention the actual payment made to the media in the invoice issued to the client. Whether or not the amount paid or payable to the media by an advertising agent is separately mentioned in the invoice is not relevant. The ad agency does not necessarily receive the exact amount paid or payable to the media from the client. In other words, the ad agency does not act as an agent of the customer when it pays the amount to the media. Inputs or input services are integral part of the taxable service provided and the value of all such inputs and input services are liable to be included in determining the consideration for the purpose of levy of service tax.
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While so much action was happening on the hardcopy front, the softcopy version could not be left much behind. Google sought an opinion from the Authority for Advance Rulings whether selling advertisement space on its search site to Indian entities would attract service tax. The search engine company took a familiar tack that it was not in the business of making or displaying advertisements but in space-selling activity. The service tax department countered by saying that the definition of advertising service was wide enough to include providing advertisement space on the Internet. The AAR ruled in favour of the department, stating that the company would be classified as an advertising agency and the services provided by it would come under the purview of service tax. The AAR decision is bound to upset the applecart of many advertising agency. With no clear definition of `services' anywhere, the field is left wide open for the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) and the courts to debate on this. Budget 2006 provides an opportunity for the Finance Minister to iron out the creases in the service tax regime. Advertising agency is any commercial concern engaged in providing any services connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant. Services provided to a client by advertising agency in relation to advertisement in any manner are defined to be the taxable services. The value of taxable services in relation to service provided by an advertising agency to a client is the gross amount charged by such agency from the client for services in relation to advertisements. This includes the gross amount charged by the agency from the client for making or preparing the advertisement material, irrespective of the fact that the advertising agency directly undertakes the making or preparation of advertisement or gets it done through another person as well as the commission received by the agency. However, the amount paid excluding their own commission by the advertising agency, for space and time in getting the advertisements published in the print media (i.e. newspapers, periodicals, etc.) are not includible in the value of taxable service.

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As the value of taxable service is the gross amount charged by the advertising agency in relation to the services rendered to his client, the charges on account of travel, transportation and hotel stay, which form part of the bill correctly forms part of the value of the taxable service. If the market Survey & Research relates to the advertisement, and all expenses are charged from the client on this account, they are correctly includible in the value of taxable service. Directorate of Audio and Visual Publicity (DAVP) not being a commercial concern is not liable to pay Service Tax in respect of the services rendered by it to other Central Government Departments. The amount charged by foreign TV channels directly to their clients in foreign currency is not includible as these amounts are not charged by the Advertising Agency from the clients.3 when advertisement is released directly in the newspapers by a client (i.e. not through an advertising agency), no Service Tax is levied while the same advertisement is released in the news paper through advertising agency on behalf of the same client, the Service Tax become leviable on the commission of the Advertising Agency. The reason for this distinction is that in case of direct advertising by the clients, no service is being provided, hence no Service Tax would be payable. However in cases where the advertisement is released through Advertising Agencies, a service has been rendered by the latter. Hence, the Service Tax would be leviable on the agency charges of the Advertising Agency, not on the total charges recovered from the clients. In the case of service provided by advertising agency, Service Tax would be payable on the gross amount charged by the Advertising Agency from the Clients. The exclusion of cost of paper and printing is not permissible, as it constitutes a component of service provided. The Cinema theatres cannot be treated as advertisement agencies as they project advertisements only on behest of advertising agencies. Further it has already been clarified that the amount paid by advertising agency for space and time in getting the advertisement published in print media (i.e. newspapers, periodicals etc), or the electronic media (Doordarshan, Private T.V. Channels, AIR,

Ministrys F.No.341/43/96-TRU dt.31.10.1996

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Cinema theatres etc) will not be includible in the value of taxable service for the purpose of levy of Service Tax. The Gujarat High Court in the case of Addition Advertising vs. Union of India4 has held that levy of tax on advertising service is not unconstitutional. It was held that this is not a tax on any profession, trade, calling or employment, but in respect of service rendered. If there is no service, there is no tax. It was further held that the tax is not on advertisement but on the services rendered with reference to the advertisement and there is a clear distinction between the advertisement service and advertisement. Constitutional validity of levy of service tax on advertising agents challenged. Tax is levied on the services provided by the advertising agency in relation to advertisement and it is not the tax on the advertisement. Service tax levied on advertising agents do not fall under Entry 55 of State List ( List II ) of Constitution [taxes on advertisement other than advertisements published in the newspapers (and advertisements broadcast by radio or television)]. It is not violative of Article 14 of the Constitution either. In the case of Advertising Club Vs Central Board of Excise & Customs5 Levy of service tax on advertisement held to be valid and in accordance with the provisions of the Constitution. Held it is not violative to the fundamental right, rather it is in public interest and levy of 5% is not unreasonable. Further held that it is not for the courts to interfere in the discretion of the legislature to impose tax. Petitioner claimed that service provided by him are not covered under the definition of taxable services. Determination of taxability of the services provided by petitioner depends of the factual determination of the exact nature of business activity. Thus the case remanded and allowed to produce evidence to support his claim under Zodiac Advertisers Vs. Union of India6.

(1998 (98) ELT 14) [2001] 131 ELT 35 (Madras). 2004 (166) ELT25

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PLEA AGAINST SERVICE TAX ON BROADCASTING

On 28th September 2009 the Federation of Indian Chambers of Commerce and Industry (FICCI) has urged the Government not to impose service tax on broadcast services till such a tax becomes VAT-able. FICCI has said in a letter to the Ministry of Finance that enlarging the scope of the service tax to broadcast service will have a serious and retrograde impact on the entertainment, advertising and fast-moving consumer goods industry (FMCG), The chamber said that unlike most industries, entertainment is a unique combination of skills, talent, technology and infrastructure. The creation of a product like film involves several stages of production, distribution and exhibition. These various stages, inter alia, produce a product which is comprehensible only at the final stage. ``In the scheme in vogue, the same product will be taxed at multiple points which obviously cannot be the intention of the Government,'' the chamber said. ``It needs to be appreciated that investment in advertising and brand building in India is one of the lowest in the world, either on per capita basis or as a proportion of total Gross Domestic Product (GDP).'' Asian countries such as China with growth escalating over eight per cent consistently, is increasing advertising expenditure to GDP ratio. The size of advertisement expenditure in South Korea, Taiwan, Thailand, Malaysia and Indonesia is more than that of India. The chamber submitted that at present in India, the total advertising expenditure on electronic media such as television, radio and the Internet is approximately Rs 3,500 crore annually. ``By and large, advertising budgets of the corporate and others are broadly inflexible or fixed and additional levy of five per cent would lead to reduction in media revenues of electronic media as the attempt would be to absorb the tax within the existing budgets,'' the chamber argued. ``India has clearly signalled the pursuit of a free and open market economy in recent years. A tax on advertising non-VATable tax does not exist anywhere in the world'' and at this juncture, such a levy would send contrary signals to the rest of the world, FICCI said.
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Apart from this, consumer goods manufacturers already bear the cascading effect of excise duty, sales tax and other inter-State levies that are reducing the industry's growth despite excess manufacturing capabilities, the chamber said. ``It is widely felt that one more tax on consumer goods industry's critical inputs like advertising will make their products even more expensive and thereby reduce demand further,'' it said. The Ministry of Finance, Department of Revenue (Tax Research Unit) has been decided that in the case of persons, who are printing and publishing telephone directories, Yellow pages or business directories, their activity is essentially of printing a readymade advertisements from the advertisers and publishing the same in the directory. Their activities are similar to those carried out by newspapers or periodicals. As such, this activity shall not attract service tax. However, if these persons also undertake any activity relating to making or preparation of an advertisement, such as designing, visualising, conceptualising etc., then they will be liable to pay service tax on the charges made thereon.

MANNER OF PAYMENT
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Individuals, proprietorship or partnership concerns are required to pay this tax on quarterly basis. All other taxpayers are required to pay it on monthly basis. Tax is to be paid on the value of service received during the month/quarter. Tax for a month/quarter has to be deposited by the 5th (6th in case of electronic payment) of the next month if march/quarter ending March, it is required to be deposited by the 31st March. It is to be paid on self assessment basis by the taxpayer. It could be deposited in any of the designated banks through a simple challan. The list of designated banks is available at http://pccacbec.nic.in/. Service tax can be paid electronically through the designated banks providing this facility. The list of such banks along worth detailed information on e-payment is available on www.cbec.gov.in and http://pccacbec.nic.in/ Compilation, printing and publishing of Telephone Directories, yellow pages and business directories covered under the definition of 'advertising agency' and liability to pay Service Tax. Attention of the Trade and Field Formations are invited to the fact that doubts have been raised as to whether persons engaged in the activity of compilation, printing and publishing of telephone directories, Yellow pages and business directories are covered under the definition of 'advertising agency' and accordingly liable to pay service tax. The matter has been examined by the Ministry of Finance, Department of Revenue (Tax Research Unit). It has been decided that in the case of persons, who are printing and publishing telephone directories, Yellow pages or business directories, their activity is essentially of printing a readymade advertisements from the advertisers and publishing the same in the directory. Their activities are similar to those carried out by newspapers or periodicals. As such, this activity shall not attract service tax. However, if these persons also undertake any activity relating to making or preparation of an advertisement, such as designing, visualising, conceptualising etc., then they will be liable to pay service tax on the charges made thereon. In respect of persons, agencies engaged in canvassing for advertisements for which they get commission from the publishers do not provide any service like making, preparing, displaying and exhibiting and only undertake canvassing for the advertising.

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SERVICE TAX ON ADVERTISEMENTS

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. 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.' In view of above, I want 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.

MAKING OF BANNER OR HOARDING LIABLE TO SERVICE TAX

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C. N. Ramachandran Nair and V.K. Mohanan, JJ.7 in the case of Commissioner of Central Excise & Customs v. Zodiac Advertisers8 held that the making and selling of advertisement materials to customers in form of banner or hoarding of film-slide, etc., is advertisement as defined under section 65(2), and also held that all activities referred to in definition clause need not be carried out by commercial concern to answer description of advertising agency. Here Assessee was engaged in procuring, making and selling advertising materials in form of vinyl stickers, cloth banners, fibre boards, H.T.P. boards, corrugated light boxes, acrylic light boxes, vehicle tyre stephney covers, PVC balloons, display stands, cinema slides, PVC danglers, etc. Adjudicating authority confirmed demand of service tax on assessee under head Advertising agency which was upheld by Commissioner (Appeals). On appeal, Tribunal held that to be called as advertising agency all activities mentioned in definition should be carried out by a person and since assessee had not carried out all those activities, it would not come under description of advertising agency. It was also held that when Legislature says that any commercial concern engaged in providing any service connected with advertisement is an advertising agency, Tribunal had no authority to hold that carrying on of all activities pertaining to advertisement only would attract definition clause and it was also held that since assessee was admittedly engaged in production and sale of advertisement to be liable to pay service tax as an advertising agency. Service tax trade notice no. 32/2003 gave Clarification regarding service tax on Advertisement. Because a doubt has been raised as to whether the Postal Department is liable to pay the service tax on charges collected for display of advertisements on postal articles under the category of advertising agency. In this regard, the Board has clarified that vide 65(105)(e) chapter V of the Finance Act,1994, taxable service means any service provided to a client, by an advertising agency in relation to Advertisement, in any manner, and vide 65(3) of Chapter-V of the Finance Act,1994 advertising agency means any commercial concern engaged in providing any service
7

High Court of Kerala C.E. APPEAL NO. 21 OF 2006

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connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant. It is clear from these definitions that: the tax is on service in relation to advertisement and not on advertisement as such. the tax is on advertisement agency which is a commercial concern. In the instant case, the postal department does not provide any service in relation to the advertisement, it only carries the advertisement. Therefore, the activity of the Postal Department under reference does not fall in the scope of the taxable service under the Finance Act,1994. Use of the word commercial concern in the definition of an advertising agency is not without significance and this precludes the Government Departments from its scope. As such the Postal Department will also not be covered in the statutory definition of advertising agency.

EXEMPTION & EXCLUSION

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i.

The services provided by the Advertising Agencies to United Nations, an International Organization and certain specified Diplomatic Missions are exempted from payment of Service Tax.9

ii.

Directorate of Audio and Visual Publicity (DAVP) not being a commercial concern is not liable to pay Service Tax in respect of the services rendered by it to other Central Government Departments.

iii.

Film & documentary produced by the Film Producer is not leviable to Service Tax provided that the advertising agency makes the payment of Service Tax on including the value of Film/documentary. In case the film producer chooses to charge the client directly, in that case he has to pay Service Tax accordingly.10

iv.

The Service rendered by local cable Television operators of mere display of Advertisements in the Television Channels Broadcast through Electronic media and charges collected from Customers in respect of the cost of space and time for such display would not be leviable to Service Tax.11

v.

Release of advertisement directly in the News Papers (not through advertising agency) by the clients, is not covered by Service Tax as service is being provided by the news paper and not the advertising agency.

PROCEDURE FOR OBTAINING A SERVICE TAX REGISTRATION

9

Notification No. 48/98-ST dt.24.04.1998, 44/98-ST dt.22.01.1998, 47/98-ST dt.24.04.1998) Ministrys F.No.341/43/96 TRU dt.31.10.1996 Ministrys F.No.341/51/2000 TRU dtd.22-11-2000

10

11

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A prospective Service tax assessee seeking registration should file an application in Form ST-1 (in duplicate) with the jurisdictional Central Excise officer/ Service Tax officer within 30 days from the date on which the service becomes taxable or from the commencement of the provision of a taxable service, as may be applicable. Department is required to issue the registration certificate to the assessee within 7 days of the receipt of the application. In case of failure to issue registration certificate within 7 days, the registration applied for is deemed to have been granted and the assessee can carry on its activities. The registration certificate contains a service tax registration number. A single registration certificate number can be obtained for all services. However, the applicant should mention all taxable service categories on the registration application. Service tax registration needs to be obtained for each taxable service category. In case a service provider already has a service tax registration certificate, the service provider would need to get the service tax registration certificate amended for the addition of the new taxable service category in the certificate. The service provider is required to intimate any change in information submitted to the Central Excise Officer at the time of registration within 30 days of the said change. There is no specific penalty for failure to obtain registration. However, as per residuary penalty clause (i.e. penalty for contravention where no specific penalty is provided), penalty which may extend to Rs 1000/- may be leviable. Every tax payer is required to take registration from department. Small service provider is bound to take registration when turnover will cross to 10 lakh. For registration application is made upon ST-1 FORM in local Central Excise and Service Tax office. Registration is granted within seven days of application. Records, including computerized record must be maintained by tax payer in compliance with other law which is acceptable.

CONCLUSION
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In concluding remarks we can say that advertisement was one of the first services to be brought into the service tax net. Since then, it has turned out to be one of the most important services apart from being blockbuster revenue grosser for the Government. The Finance Act (2) 1996 enlarged the scope of levy of Service Tax on advertising agencies, however tax on this services was made applicable from 1st November, 1996. There are two sections under Service Tax Act which cover services related to advertisements. These are, Advertising services [Section 65(105)(e)], and Space selling Service [65(105)(zzzm)]. Advertising agency means any commercial concern engaged in providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant. (Section 65(3) of Finance Act, 1994 as amended). And, Taxable Service means any service provided to a client by advertising agency in relation to advertisement in any manner. (Section 65(72)(e) of Finance Act, 1994 as amended). The value of taxable services in relation to service provided by an advertising agency to a client shall be the gross amount charged by such agency for services rendered in relation to advertisements.(Section 67 of Finance Act, 1994 as amended). As the value of taxable service is the gross amount charged by the advertising agency in relation to the services rendered to his client, the charges on account of travel, transportation and hotel stay, which form part of the bill correctly forms part of the value of the taxable service. when advertisement is released directly in the newspapers by a client (i.e. not through an advertising agency), no Service Tax is levied while the same advertisement is released in the news paper through advertising agency on behalf of the same client, the Service Tax become leviable on the commission of the Advertising Agency. The reason for this distinction is that in case of direct advertising by the clients, no service is being provided, hence no Service Tax would be payable.

BIBLIOGRAPHY
BOOKS
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SERVICE TAX ON ADVERTISEMENTS

Iyengar, Sampath; Law of Income Tax ; 2005; 10th Edn.;Vol. 4; Bharat Law House Pvt.Ltd.; New Delhi.

Manoharan, T.N.; Direct Tax Laws ; 2007; 13th Edn.; Snow White Publications Pvt. Ltd.,Mumbai.

Santhanam, R.; Commercial s Handbook on Double Taxation Avoidance Agreements and Tax Planning for Collaborations ; 2005 Edn.; Vol. I; Commercial Law Publishers (India) Pvt Ltd.; New Delhi.

Singhania & Singhania; Taxmanns Direct Taxes Laws & Practice ; 2008; 40th Edn; Taxmann Publications; New Delhi.

STATUTES
Constitution of India, 1950 Finance Act, 1994 Finance Act, 1997

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