Advertising refers to the process of promoting the products and/or services of a business by either or both offline and online means. For businesses and individuals using advertising services in India, GST compliance is now an important issue, since GST (Goods & Services Tax) now effectively replaces all the previous indirect taxes on such services. Let’s check out the applicability of GST on advertising agency services.
Before GST – Tax on Advertising Services
Before the launch of GST on 1 July, 2017, advertising services like most other services were taxable under service tax, except for a few cases such as the sale of time slots or space, which were not liable to tax. In 2014, however, all kinds of sale of advertising space or time, except only for print media, were included in the taxable service category.
GST Rate on Advertising Services
The Goods & Services Tax was launched in July 2017 and effectively replaced all the existing indirect taxes, including services tax, VAT, etc.
Under GST, all types of advertising services, including the sale of space/time in print, TV and online media are eligible for taxation in the following manner.
GST on Digital Media Advertising
Advertising services in digital media space are liable to pay GST at 18% rate.
GST on Print Media Advertising
GST on advertising services in print media (newspapers, etc.) is charged at 5% rate.
GST on the Services of Advertising Agencies
In case the advertising is being done through an agent or an advertising agency, the GST at the same rate as above (5% for print media & 18% for digital media) will be applicable at each stage of the transaction.
For instance, if a website sells advertising space to an agency for say Rs 1,000, the transaction will be liable for 18% (i.e. Rs 180) GST. Now, if the advertising agency sells this space again to a customer or business for say Rs 1,500, the GST at the rate of 18% (i.e. Rs 270) will be charged on this transaction.
GST on advertising commission charges is 18%.
GST on Advertising outside India
In case if a person located in India is taking advertising services from another person located outside India, GST will be paid by the recipient of services on a reverse charge basis.
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GST Input Tax Credit for Advertising Services
Under GST, advertising companies are allowed to claim ITC on the taxes paid by them on inputs such as machines, equipment and goods for business purposes.
However, an advertising agency carrying out advertising in a different state from the one they are registered in will not be able to claim ITC on expenses incurred during the advertising activity performed in another state.
Not available for advertising services and agencies.
SAC Code for Advertising Services
998361 – Advertising Services
998362 – Purchase or sale of advertising space or time, on commission
998363 – Sale of advertising space in print media (except on commission)
998364 – Sale of TV and radio advertising time
998365 – Sale of Internet advertising space
998366 – Sale of other advertising space or time (except on commission)