Transcript Document

Workshop on Service tax –
AICAS
Advertisement, Broadcasting and
Space or Time selling services
9 July 2011
Contents
1
Advertising Agency’s Services
2
Broadcasting Services
3
Sale of Space or Time for Advertisement
Services
2
Advertising Agency’s Services
(introduced w.e.f. 1 November 1996)
3
Definitions
Taxable service means any service provided, or to be provided to
Taxable Service
any person, by an advertising agency in relation to
advertisements, in any manner [Section 65(105)(e)]
Advertising agency means any person engaged in providing any
Advertising
Agency
service connected with the making, preparation, display or
exhibition of advertisement and includes an advertising
consultant [Section 65(3)]
Advertisement includes any notice, circular, label, wrapper,
Advertisement
document, hoarding or any other audio or visual representation
made by means of light, sound, smoke, or gas [Section 65(2)]
4
Key circulars/ clarifications
 Cost of market research conducted in relation to advertisement liable to Service tax
under this category [TRU letter F. No. 341/43/96-TRU, dated 31 October 1996]
 Mere canvassing of advertisements for publishing on commission basis classifiable
under the category of ‘Business Auxiliary Services’ and not under this category,
provided the activity does not entail other services like making, preparation, display or
exhibition of advertisement [Circular No. 96/6/2007-ST, dated 23 August 2007 as
amended by Circular No. 98/1/2008-ST, dated 4 January 2008]
 In case of persons who are printing and publishing telephone directories, yellow
pages or business directories, their activity is essentially of printing 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 advertisement, such as designing,
visualizing, conceptualizing, etc., then they will be liable to pay Service tax on the
charges made thereon. [TRU letter F. No. 345/4/97-TRU, dated 16 August 1999 –
withdrawn w.e.f. 23 August 2007]

Key circulars/ clarifications
5
Key circulars/ clarifications (contd.)
 If canvassing involves services like receiving the text of the ad, estimating the space
that such ad would occupy in the newspaper/ periodical/ magazine, negotiating the
price, forming the general layout of the ad that would finally appear in the newspaper,
then such activity would be liable to Service tax under this category [Circular No.
64/13/2003-ST, dated 28 October 2003 – withdrawn w.e.f. 10 May 2007]
 Selling of free commercial time allotted to a TV serial producer in lieu of his
programmes telecasted by the channel does not fall within the purview of advertisement
service since this activity is not connected to making, preparation, display or exhibition
of advertisement. This has nothing to do with actual presentation of the advertisement
[Circular No. 78/08/2004-ST, dated 23 March 2004 – withdrawn w.e.f. 10 May 2007]
 Charges paid by the agency to print media or electronic media as a cost of space or
time are not to be included in the value of ‘Advertisement Agency’s Services’. The
same are covered the category of ’Sale of Space or Time for Advertisement Services’
w.e.f 1 May 2006
6
Key Case laws/ Advance Rulings
 Mere ad space selling or letting out premises for display of products or
advertisements would not get covered under this category [Bhavya Enterprises
(Advertisers) vs. CCE, Delhi (2006-1-STR-50-Tri.-Del.); CCE, Kolkatta vs. The Incoda
(2006-3-STR-302-Tri.-Kolkata)] – However, the same are now specifically covered
under the category of ’Sale of Space or Time for Advertisement Services’ w.e.f 1 May
2006
 The activity of providing/ selling space for display or exhibition of advertisement on
website is classifiable as advertisement services [Google Online India Private Limited,
In re (2006-1-STR-53-AAR)]
 Persons who merely manufacture screen printed products as per the directions of the
advertiser, cannot be called as an advertisement agency in the absence of any creative
activity [Zodiac advertisers vs. CCE Cochin 2006 (3) S.T.R. 538 (Tri. - Bang.)]
 Advertisement services provided by an agency to State Government which would be
displayed for public interest would be liable to Service tax under ‘Advertisement
Agency’s Services’ [Prithvi Associates vs. CCE 2005 2 STT 149 (Mum. CESTAT]
 Target incentives received by advertising agency from media not to be included in the
value of taxable services [Euro RSCG advertising Ltd. vs. Commissioner of CST,
Bangalore (2007-7-STR-277-Tri.-Bang.)]
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Key Case laws/ Advance Rulings (contd.)
 Sale of Telecast rights – The same is not liable to Service tax under ‘Advertisement
Agency’s Services’ since there is no advertisement and also there are no services
rendered by the holder of the right [BCCI vs. CST 2007 9 STT 399 (Mum. CESTAT)] –
However the same is liable to Service tax under the category of ‘Broadcasting Services’
w.e.f 16 July 2001
 Display of logo and sponsorship money not liable to Service tax under ‘Advertisment
Agency’s Services’ as there is no service being provided [BCCI vs. CST 2007 9 STT
399 (Mum. CESTAT)] – However the same is liable to Service tax under the category of
’Sale of Space or Time for Advertisement Services’ w.e.f 1 May 2006
 Discounts/ Commission received by advertising agency from media, when:
 passed on by the advertising agency to its clients, not to be included in the value
of taxable services [Euro RSCG advertising Ltd. vs. Commissioner of CST,
Bangalore (2007-7-STR-277-Tri.-Bang.)]
 not passed on by the advertising agency to its clients, to be included in the value
of taxable services [Adwise Advertising Pvt. Ltd vs. UOI (2001-131-ELT-529-Mad.)]
 Services of installation and display of advertisement in addition to manufacture of
signage covered under ‘Advertisement Agency’s Services’
 Mere making of Neon sign boards, painter/ writer of sign boards/ preparation of
hoardings not covered under ‘Advertisement Agency’s Services’
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Key Issues
 Where the advertiser is located outside India, whether services provided by Indian
advertising agency in relation to advertisement of its products in India would qualify as
‘export’ in terms of the Export Rules – Recently the CBEC has clarified [vide Circular
No141/10/2011-TRU, Dated: May 13, 2011] that for Advertising services to qualify as
Export (prior to 27 February 2010), the ‘accrual of benefit’ of such services should be
outside India and such accrual is not restricted to mere impact on the bottom-line of the
person who pays for the service. It was further clarified that:
“The effective use and enjoyment of the service will of course depend on the nature
of the service. For example effective use of advertising services shall be the place
where the advertising material is disseminated to the audience though actually
the benefit may finally accrue to the buyer who is located at another place. “
 Classification, valuation and recovery of Service tax (charged by the media) when:
 Media buying is being done by the advertising agency on P to P basis
 Media buying is being done by the advertising agency on P to A basis
 Where ad space on print media is procured by advertising agency (on P to P basis) for
its clients, the whole amount recovered from the client (including its commission) may
be liable to Service tax under the category of advertisement services (while sale of ad
space in print media per se has been excluded from the purview of Service tax)
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Broadcasting Service
(introduced w.e.f. 16 July 2001)
10
Definitions
T
Taxable service means any service provided, or to be provided to any
person, by a broadcasting agency or organization in relation to
broadcasting in any manner [Section 65(105)(zk)] and,
Taxable Service
 in the case of a broadcasting agency or organization, having its head
office situated in any place outside India, includes service provided by
its branch office or subsidiary or representative in India or any agent
Explanation - For the
removal of doubts, it is
hereby declared that so
long as the radio or
television programme
broadcast is received in
India and intended for
listening or viewing, as the
case may be, by the
public, such service shall
be a taxable service in
relation to broadcasting,
even if the encryption of
signals or beaming thereof
through the satellite might
have taken place outside
India.
appointed in India or by any person who acts on its behalf in any
manner engaged in the activity of
– selling of time slots for broadcasting of any programme or
– obtaining sponsorships for programme or
– collecting the broadcasting charges or
– permitting the rights to receive any form of communication like
sign, signal, writing, picture, image and sounds of all kinds by
transmission of electro-magnetic waves through space or through
cables, direct to home signals or by any other means to cable
operator, including multi-system operator or any other person
on behalf of the said agency or organization
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Definitions (contd.)
Broadcasting agency or organization means any agency or
Broadcasting
agency
organization engaged in providing service in relation to
broadcasting in any manner and, in the case of a broadcasting
agency or organization, having its head office situated in any
place outside India, includes… [Section 65(16)]
Broadcasting has the meaning assigned to it in clause (c) of
Section 2 of the Prasar Bharati (Broadcasting Corporation of
India) Act, 1990 (25 of1990) and also includes programme
Broadcasting
selection, scheduling or presentation of sound or visual matter on
a radio or a television channel that is intended for public
listening or viewing, as the case may be; and in the case of a
broadcasting agency or organization having its head office
situated in any place outside India, includes… [Section 65(15)]
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Definitions (contd.)
As per Section 2(c) of the Prasar Bharati Act, Broadcasting
means dissemination of any form of communication like signs,
signals, writing, pictures, images and sounds of all kinds by
Broadcasting
transmission of electro-magnetic waves through space or through
cables intended to be received by the general public either
directly or indirectly through the medium of relay stations and all
its grammatical variations and cognate expression shall be
construed accordingly.
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Key circulars/ clarifications
 Up-linking agencies are not broadcasting agencies and are not liable to Service tax in
respect of such service [CBEC letter F. No. B.II/I/2000-TRU, dated 9 July 2001]
 Multi-System Operators (“MSO”) are also not broadcasting agencies to the extent it
merely retransmits signals. However, in case the MSO operates a local cable channel
such as Spectranet, Siticable, Incable, Sumangali, etc. and broadcasts a programme or
serial or advertisement on his own, he would be liable to pay Service tax on the amount
he charges for the service rendered to his clients in relation to broadcasting of such
programmes [CBEC letter F. No. B.II/I/2000-TRU, dated 9 July 2001]
 Service tax leviable on the amount received by the broadcaster net of advertising
agency’s commission. However, such abatement is allowed only when the same is
specifically indicated in the invoice raised by the broadcaster. [CBEC letter F. No.
341/43/2001-TRU, dated 18 October 2001]
 Broadcasting is a composite activity which includes dissemination, communication
through electromagnetic waves, and receiving of such signals disseminated. Thus
even where all the receivers of a particular place stop receiving the due to electrical
fault in that place, it cannot be said that there has been no ‘broadcasting’ during that
period.
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Key Notifications
 Services provided by the digital cinema service provider to the producer/ distributor in
relation to delivery of content of cinema in digital form after encryption electronically
has been exempted from Service tax [Notification No. 12/2007-Service Tax, dated 1
March 2007]
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Key Case laws
 Activity of broadcasting not over or complete until the signals are received by the
intending public. Thus, where the encryption of signals happen from outside India but
the same are received in India, the activity would be said to be completed in India and
hence would be liable to Service tax [Zee Telefilms Limited vs. CCE, Mumbai (2006-3STR-252-Tri.-Del)]
 Inclusive part of definition of 'broadcasting' (that covers sale of time slots) would be
attracted only when, inter alia, the entity selling time slots in India has any office outside
India [Vijay Television (P.) Ltd. vs. CST, Chennai (2008-9-STR-39-Tri.-Chennai)]
 Broadcasting services provided directly from the broadcaster to the end customer
covered under the category of ‘Broadcasting Services’ as post the amendment to the
definition of ‘broadcasting’ w.e.f. 16 June 2005, where in the clause ‘services to cable
operators including MSO or any other person on behalf of the said agency’ was
inserted. After the amendment services provided directly from the broadcaster to the
end customer would also get covered under the said category [CC,CE &ST vs. World
Space India (P) Limited 2009 18 STT 275 (Bang. CESTAT)]
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Key Issues
 Scope of the term ‘services in relation to broadcasting in any manner’ – whether it
includes:
 Grant of distribution rights in relation to channels
 Sale of time slots by a broadcasting agency not having head office situated outside
India
 Where the encryption of signals happen from India but the same are received outside
India, whether the same would qualify as export or would be construed as a non
taxable service (in light of the definition of this category)
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Sale of Space or Time for Advertisement
Service
(introduced w.e.f. 1 May 2006)
18
Definitions
Taxable service means any service provided or to be provided to
any person, by any other person, in relation to sale of space or
Taxable Service
airtime 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 organization. [Section 65(105)(zzzm)]
Explanation 1 - For the purposes of this sub-clause, “sale
Explanation 2 - For the purposes of this
of space or time for advertisement” includes:
sub-clause, ‘‘print media’’ means:
(i) providing space or time, as the case may be, for display,
(i) ‘‘newspaper’’ as defined in sub-
advertising, showcasing of any product or service in video
section (1) of Section 1 of the Press and
programmes, television programmes or motion pictures or
Registration of Books Act, 1867;
music albums, or on billboards, public places, buildings,
(ii) ‘‘book’’ as defined in Section 1(1) of
conveyances, cell phones, automated teller machines,
the Press and Registration of Books
internet;
Act, 1867, but does not include
(ii) selling of time slots on radio or television by a person,
business directories, yellow pages and
other than a broadcasting agency or organisation; and
trade catalogues which are primarily
(iii) aerial advertising
meant for commercial purposes
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Key Issues
 Distinction between this category and ‘Renting of Immovable Property Services’ Provision of space in a shopping mall for installing television monitors for displaying
advertisements
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The views in this presentation are personal views of the Presenter. Further, the information contained is of a
general nature and is not intended to address the circumstances of any particular individual or entity. Although,
THANK YOU
the endeavour is to provide accurate and timely information, there can be no guarantee that such information is
accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on
such / this information without appropriate professional advice which is possible only after a thorough
examination of facts / particular situation.
Presenter’s contact details
Abhinav Srivastava
KPMG
Phone number: +91 124 307 5192
Email: [email protected]
www.in.kpmg.com
The views in this presentation are personal views of the Presenter. Further, the information
contained is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although, the endeavor is to provide accurate and timely information, there can
be no guarantee that such information is accurate as of the date it is received or that it will
continue to be accurate in the future. No one should act on such / this information without
appropriate professional advice which is possible only after a thorough examination of facts /
particular situation.
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