(1) Advertising Agency Service
(A) Date of Introduction:
01.11.1996 vide Notification No.6/96-ST dt. 31.10.1996.
(B) Definition and scope of service:
"Advertising agency" means any person 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
Service" means any service provided or to be provided to any person by an
advertising agency in relation to advertisement, in any manner.
(Section 65 (105) (e) of Finance Act, 1994 as amended)
"advertisement" includes any notice,
circular, label, wrapper, document, hoarding or any other audio or visual
representation made by means of light, sound, smoke or gas;
(Section 65(2) of Finance Act, 1994 as amended)
(C) Rate
of Tax & Accounting Code:
|
Rate of Tax
|
Accounting Code
|
Service Tax
|
10% of the value of
services
|
00440013
|
Education Cess
|
2% of the service
tax payable
|
00440298
|
Secondary and
Higher Education cess
|
1% of the service
tax payable.
|
00440426
|
Other
-Penalty/interest
|
As levied or
applicable
|
00440016
|
(Rate of tax is effective
from 24.02.2009.)
( D ) Classification
of Taxable Services:
(1)
The
classification of taxable services shall be determined according to the terms
of the sub-clauses (105) of section 65;
(2)
When
for any reason, a taxable service is prima facie, classifiable under two or
more sub-clauses of clause (105) of section 65, classification shall be
effected as follows :-
(a) the
sub-clause which provides the most specific description shall be preferred to
sub-clauses providing a more general description;
(b) composite services consisting of a
combination of different services which cannot be classified in the manner
specified in clause (a), shall be classified as if they consisted of a service
which gives them their essential character, in so far as this criterion is
applicable;
(c) when a
service cannot be classified in the manner specified in clause (a) or clause
(b), it shall be classified under the sub-clause which occurs first among the
sub-clauses which equally merits consideration.
( Sec.65A of Finance
Act,1994)
(E) Valuation
of taxable services for charging Service tax
(1)
Service tax chargeable on any taxable service with reference to its
value shall,-
(i) in a case where the provision of service is for a consideration
in money, be the gross amount charged by the service provider for such service
provided or to be provided by him;
(ii) in
a case where the provision of service is for a consideration not wholly or
partly consisting of money, be such amount in money, with the addition of
service tax charged, is equivalent to the consideration;
(iii) in a case where the provision of service is for a
consideration which is not ascertainable, be the amount as may be determined in
the prescribed manner.
(2)
Where the gross amount charged by a service provider, for the service provided
or to be provided is inclusive of service tax payable, the value of such
taxable service shall be such amount as, with the addition of tax payable, is
equal to the gross amount charged.
(3) The gross amount charged for the taxable
service shall include any amount received towards the taxable service before,
during or after provision of such service.
(4)
Subject to the provisions of sub-sections (1), (2) and (3), the value shall be
determined in such manner as may be prescribed.
Explanation.-For the purposes of this section,-
(a) "consideration" includes any amount that is payable for the
taxable services provided or to be provided;
(b)
"money" includes any currency, cheque, promissory note,
letter of credit, draft, pay order, travellers cheque, money order, postal remittance and other similar
instruments but does not include currency that is held for its numismatic
value;
(c)
"gross amount charged" includes payment by cheque,
credit card, deduction from account and any form of payment by issue of credit
notes or debit notes and 'book
adjustment, and any amount credited or debited, as the case may be, to any
account, whether called "Suspense account" or by any other name, in the books
of account of a person liable to pay service tax, where the transaction of
taxable service is with any associated enterprise.
( Sec.67 of
Finance Act,1994)
Inclusion in or Exclusion from value of certain
expenditure or cost:
(1)
Where any expenditure or costs are incurred by the service provider in
the course of providing taxable service, all such expenditure or costs shall be
treated as consideration for the taxable service provided or to be provided and
shall be included in the value for the purpose of charging service tax on the
said service.
[Rule 5(1) of Service
Tax (Determination of Value) Rules,2006)]
(2) The expenditure or costs
incurred by the service provider as a pure agent of the recipient of service,
shall be excluded from the value of the taxable
service if all the following conditions are satisfied, namely:-
(i) the service provider acts as a pure agent of the recipient
of service when he makes payment to third party for the goods or services
procured;
(ii) the recipient of service receives and uses the goods or
services so procured by the service provider in his capacity as pure
agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the
third party;
(iv) the recipient of service authorizes the service provider to
make payment on his behalf;
(v) the recipient of service knows that the goods and services
for which payment has been made by the service provider shall be provided
by the third party;
(vi) the payment made by the service provider on behalf of the
recipient of service has been separately indicated in the invoice issued by the
service provider to the recipient of service;
(vii) the
service provider recovers from the recipient of service only such amount as has
been paid by him to the third party; and
(viii)
the goods or services procured by the service
provider from the third party as a pure agent of the recipient of service are
in addition to the services he provides on his own account.
[Rule 5(2) of Service Tax
(Determination of Value) Rules,2006)]
(F) Clarifications issued by the Board:
(i) The Board vide Circular No.96/7/2007-ST dated
23.08.2007 on advertising agency services has clarified the following issues-
004.01
/ 23.08.07
|
Persons
/ agencies canvass advertisements for publishing, on commission basis. Such
persons / agencies do not provide any other services like making,
preparation, display or exhibition of advertisement.
Whether
merely canvassing advertisement for publishing on a commission basis by
persons / agencies is classifiable as Advertising Agency service [section
65(105)(e)] or not?
|
Merely
canvassing advertisements for publishing, on commission basis, is not
classifiable under the taxable service falling under section 65(105)(e).
Such
services are liable to service tax under business auxiliary service [section
65(105)(zzb)].
|
(G) Exemption & Exclusion:
1. Exemption to Small
Scale Service Providers:
In exercise of the
powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32
of 1994) (hereinafter referred to as the said Finance Act), the Central
Government, on being satisfied that it is necessary in the public interest so
to do, hereby exempts taxable services of aggregate value not exceeding Ten lakh*
rupees in any financial year from the whole of the service tax leviable thereon under section 66 of the said Finance Act:
Provided
that nothing contained in this notification shall apply to,-
(i) taxable services provided by a person under a brand name or
trade name,
whether
registered or not, of another person; or
(ii) such value of taxable services in respect
of which service tax shall be paid by such person and in such manner as
specified under sub-section (2) of section 68 of the said Finance Act read with
Service Tax Rules,1994.
2.
The exemption contained in this notification shall apply subject to the
following
conditions, namely:-
(i) the provider
of taxable service has the option not to avail the exemption contained in this
notification and pay service tax on the taxable services provided by him and
such option, once exercised in a financial year, shall not be withdrawn during
the remaining part of such financial year;
(ii) the provider of taxable service shall
not avail the CENVAT credit of service tax paid on any input services, under
rule 3 or rule 13 of the CENVAT Credit Rules, 2004 (herein after referred to as
the said rules), used for providing the said taxable service, for which
exemption from payment of service tax under this notification is availed of;
(iii) the provider of taxable service shall
not avail the CENVAT credit under rule 3 of the said rules, on capital goods
received in the premises of provider of such taxable service during the period
in which the service provider avails exemption from payment of service tax
under this notification;
(iv) the provider of taxable service shall
avail the CENVAT credit only on such inputs or input services received, on or
after the date on which the service provider starts paying service tax, and
used for the provision of taxable services for which service tax is payable;
(v) the provider of taxable service who
starts availing exemption under this notification shall be required to pay an
amount equivalent to the CENVAT credit taken by him, if any, in respect of such
inputs lying in stock or in process on the date on which the provider of
taxable service starts availing exemption under this notification;
(vi) the balance of CENVAT credit lying unutilised in the account of the taxable service provider
after deducting the amount referred to in sub-paragraph (v), if any, shall not
be utilised in terms of provision under sub-rule (4)
of rule 3 of the said rules and shall lapse on the day such service provider
starts availing the exemption under this notification;
(vii) where a taxable service provider
provides one or more taxable services from one or more premises, the exemption
under this notification shall apply to the aggregate value of all such taxable
services and from all such premises and not separately for each
premises or each services; and
(viii) the
aggregate value of taxable services rendered by a provider of taxable service
from one or more premises, does not exceed rupees *ten lakhs in the preceding financial
year.
3.
For the purposes of determining aggregate value not exceeding ten*lakh
rupees, to avail exemption under this notification, in relation to taxable
service provided by a goods transport agency, the payment received towards the
gross amount charged by such goods transport agency under section 67 for which
the person liable for paying service tax is as specified under subsection (2)
of section 68 of the said Finance Act read with Service Tax Rules, 1994, shall
not be taken into account.
Explanation.- For the purposes of this notification,-
(A) "brand name" or "trade name" means
a brand name or a trade name, whether registered or not, that is to say, a name
or a mark, such as symbol, monogram, logo, label, signature, or invented word
or writing which is used in relation to such specified services for the purpose
of indicating, or so as to indicate a connection in the course of trade between
such specified services and some person using such name or mark with or without
any indication of the identity of that person;
(B) "aggregate value not exceeding *ten lakh rupees
means the sum total of first consecutive payments received during a financial
year towards the gross amount, as prescribed under section 67 of the said
Finance Act, charged by the service provider towards taxable services till the
aggregate amount of such payments is equal to ten lakh
rupees but does not include payments received towards such gross amount which
are exempt from whole of service tax leviable thereon
under section 66 of the said Finance Act under any other notification.
4.
This notification shall come into force on the 1st day of April, 2005.
[Notification No. 6/2005-ST, dated 1-3-2005. *Amended
by Notfn.No. 8/2008-ST dated 01.03.2008]
2. Services to UN Agencies
Services provided to
United Nations or an International Organizations are exempt.
[Notification No.
16/2002-ST, dated 2-8-2002]
3. Export of service
:Any service which is taxable under clause 105 of Section 65 may be exported
without payment of service tax.
(
Rule
4 of Export of Services Rules,2005)
4. Exemption to
services provided to a developer of SEZ or a unit of SEZ:
Exempts the taxable
services specified in clause (105) of section 65 of the said Finance Act, which
are provided in relation to the authorized operations in a Special Economic
Zone, and received by a developer or units of a Special Economic Zone, whether
or not the said taxable services are provided inside
the Special Economic Zone, from the whole
of the service tax leviable thereon under section 66
of the said Finance Act subject to certain conditions. (
Refer notification for details)
{
Notification
No. 09/2009 ST dated 03.03.2009 (Prior to 03.03.2009 Notfn.No4/2004-ST dated
31.03.2004)}
5. Exemption to
value of goods & material sold by service provider:
In exercise of the powers conferred by
section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being
satisfied that it is necessary in the public interest so to do, hereby exempts
so much of the value of all the taxable services, as is equal to the value of
goods and materials sold by the service provider to the recipient of service,
from the service tax leviable thereon under section
(66) of the said Act, subject to condition that there is documentary proof
specifically indicating the value of the said goods and materials.
(Notification No.
12/2003-ST dated 20.06.2003 effective from 01.07.2003)
6. Exemption to taxable
services provided by TBI and STEP:
All taxable services,
provided by a Technology Business Incubator (TBI) or a Science and Technology
Entrepreneurship Park (STEP) recognized by the
National Science and technology
Entrepreneurship Development Board (NSTEDB) of the Department of Science
and Technology, Govt. of India from the
whole of the service tax leviable thereon subject tio
certain conditions and procedures. ( Refer
notification for details)
(Notification
No.09/2007 ST dated 01.03.2007)
7. Exemption to
taxable services provided by entrepreneurs located within the premises of TBI
or STEP:
All taxable services, provided by an
entrepreneur located within the premises
of a Technology Business Incubator (TBI)
or a Science and Technology Entrepreneurship Park (STEP) recognized by the National Science and technology Entrepreneurship Development Board (NSTEDB)
of the Department of Science and Technology, Govt. of India from the whole of the service tax leviable thereon
subject to certain conditions and
procedures. ( Refer notification for details)
(Notification
No.10/2007 ST dated 01.03.2007)
8. Exemption to
services provided to Foreign Diplomatic Missions or Consular Post in
India:
All services provided
by any person, for the official use of a Foreign Diplomatic Mission or Consular
Post in India are exempted from service tax subject to certain conditions and
procedures. (Refer notification for details)
(Notification No.
33/2007-ST dated 23.05.2007)
9. Exemption to
services provided for personal use of a family member of Diplomatic Agent or
Career Consular Officers posted in Foreign Diplomatic Mission/Consular Post in
India:
All services provided
by any person, for personal use of family member of Diplomatic Agents or Career
Consular officers posted in
a Foreign Diplomatic Mission or
Consular Post in India are exempted from service tax subject to certain
conditions and procedures. (Refer notification for details)
(Notification No.
34/2007-ST dated 23.05.2007)
(H) Important Case Laws: No important case law.
*****************