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For the success of every business, you need striking advertisements. Advertisements become an effective communication method for products or services to interact with the user. By means of hoardings, posters, newspapers, magazines, tabloids, videos on television and social media sites, etc., an advertising agency transforms the ideas of sellers into something that catches customers’ attention. In India, GST or Goods and Services Tax are imposed on advertisements in televisions, newspapers, magazines, hoardings, souvenirs, etc. After the implementation of GST, the sectors such as petroleum, e-commerce, tour operators, banking and finance services, education institutions, etc., have reduced their spending on advertisements. Take a look at the details of GST on advertising sector here.

Taxability Of Advertising Sector Pre GST

Service Tax became effective on July 1, 2012, and it was applicable on all services other than those covered under the negative list. It was applicable to all kinds of advertising services. The only exception was the sale of space or time for advertisements in print and digital media. The negative list was amended on October 1, 2014, to restrict the non-taxability of the sale of space in print media and all other sales of space or time arrangements in digital media. With the new amendments, Service Tax was imposed on all of them.

Advertising Sector Under GST And Rate Of Taxes

GST is imposed on all advertisements in print as well as digital media. GST on advertising sector has a different impact on the print and digital media. 

GST on advertising through digital media

GST on  advertising through print media

Two parties are involved - the advertiser and the publisher. Advertisers want to advertise a product or idea, whereas publishers publish these advertisements.

Two parties are involved - the advertiser and the publisher. Advertisers want to advertise a product or idea, whereas publishers publish these advertisements.

Advertisements are published on digital mediums like social media, websites, emails or SMS.

Advertisements are published in print media like newspapers, magazines, etc.

18% GST is charged.

5% GST is charged.

Example: If a news website owner sells space on his website to a business entity and charges Rs. 1,00,000 for it, the GST levied on it will be Rs. 18,000. The whole deal will be sold at a total of Rs. 1, 18,000.

Example; If a leading newspaper publishing company sells space on the front page to a business entity and charges Rs. 1,00,000 for it, the GST levied on it will be Rs. 5,000. The whole deal will be sold at a total of Rs. 1,05,000.

Advertisement Through Advertising Agencies

You can choose various options to advertise a business. Of that, an advertising agency is a much desirable option. The business entity approaches any advertising agency of their choice to advertise instead of directly approaching the advertisers. In this kind of arrangement, there are two possibilities regarding GST on advertising sector;

 

  • Advertisement in Principal’s Capacity: In this case, the party in need-advertiser approaches an advertising agency to advertise their business. The agency acts as a mediator and buys the advertisement from the advertising company in its name. Then the advertising agency resells the same to the advertiser. 

For example; 

A newspaper sells the space on its front page to an advertising agency for Rs. 100,000. Then the GST charged on the same will be Rs. 5,000. When the agency resells it to the advertiser at Rs. 1,50,000, the GST that the company should pay will be 5% of it. So, the total amount will become Rs. 1,50,000 + 5% 0f it, which is Rs. 1,57,500.

 

  • Advertisement in Agent’s Capacity: In this case, the business entity approaches the agent for advertising their business instead of the advertiser. The agent buys the space on behalf of the advertiser and charges a commission for that. GST levied would be at the rate of 5% and 18% for advertisement in print media and digital media respectively. The agent would levy 18% GST on the commission charges.

Advertisement Through Registered Person Outside India

On notified goods and services, reverse charge mechanism became applicable as per Section 5(3) of the IGST Act, 2017. GST on advertising sector is applicable to any supply of service by someone residing in a non-taxable territory to anyone located in a taxable territory.

 

For example; 

If a person residing in India buys a service from another person residing in a non-taxable territory, the buyer has to pay the GST to the Government of India as a recipient of service. 

Input Tax GST Credit On Advertising Services

Under GST, advertising companies can claim the credit of taxes paid on the purchase of equipment and high-end electronic goods they use for their business. Earlier it was not applicable. But, they cannot charge GST on services offered, including the advertisement shoots carried out at remote locations where they don’t have an office. 

 

For example;

An advertising agency registered in Maharashtra shoots an advertisement in Kerala. The hotel would charge CGST + Kerala GST for the accommodation of the entire crew. The advertising agency cannot avail of the hotel accommodation credit since they are registered in Maharashtra. The credit is available only to IGST and CGST + Home State GST.

SAC Codes Of Advertising Services

SAC is the Services Accounting Code (SAC) in which services are classified. The SAC is strictly a six-digit numeric. The first two digits are the same for all services and that is 99. The major nature of service is represented in the next two digits, whereas the last two digits indicate the detailed nature of service. Here is a list of all SAC codes related to advertising services.

Group 99836

Advertising services and provision of advertising space or time

998361

Advertising Services

998362

Purchase or sale of advertising space or time, on commission

998363

Advertising space in print media sale (except on commission)

998364

TV and radio advertising time sale

998365

Internet advertising space sale

998366

Other advertising space or time sale (except on commission)