2020 (3) TMI 293 - AAR - GST

GST Rates for Print Media Advertising Clarified: 5% for space/time, 18% for other services

The judgment clarifies that selling space/time for advertisement in print media attracts GST at 5%. Advertising agencies selling space in print media to ... Selling of space/time for advertisement in print media attracts GST @ 5% - composite supply - principal supply - determination of tax liability on composite supply under Section 8 - pure services exemption under Notification No. 12/2017-Central Tax (Rate) - rate differentiation between 5% and 18% based on nature of supplySelling of space/time for advertisement in print media attracts GST @ 5% - rate differentiation between 5% and 18% based on nature of supply - Applicability of GST rate on sale of space/time for advertisement in print media by advertising agencies. - HELD THAT: - The Authority found that 'selling of space/time for advertisement in print media' is specifically listed at Entry No. 21 under Heading 9983 of Notification No. 11/2017 and attracts GST at 5% (2.5% CGST + 2.5% SGST). Where supplies other than selling of space (for example, standalone professional services) are provided, those may attract 18% as per the same entry. The Authority also observed that volume or value incentives received by agencies are part of commission/incentive and are not to be treated as sale of space; such incentives are chargeable at 18% as they constitute consideration for services other than the principal 'selling of space' service. [Paras 8]Selling of space for advertisement in print media by advertising companies/agencies attracts GST @ 5%; volume/value incentives are chargeable at 18%.Composite supply - principal supply - determination of tax liability on composite supply under Section 8 - Tax treatment where an advertising agency sells space in print media and also provides designing/composing without separately charging for the design. - HELD THAT: - The Authority applied the statutory definitions of 'composite supply' and 'principal supply' and Section 8 determining tax on composite supplies. The combined provision of selling space and designing/composing are naturally bundled and supplied in the ordinary course of business and therefore constitute a composite supply. The Authority concluded that the sale of space in print media is the predominant element (principal supply) and designing/composing is ancillary. Pursuant to Section 8, the composite supply is to be treated as supply of the principal supply; accordingly the entire composite supply is taxable at the rate applicable to sale of space, i.e., 5%. The Authority noted that if designing/drafting is a distinct supply not forming part of a composite supply, it would attract 18%, but where bundled as here, the principal supply's rate applies. [Paras 8]Where selling of space and designing/composing are bundled as a composite supply with selling of space as the principal supply, the composite supply attracts GST @ 5%.Pure services exemption under Notification No. 12/2017-Central Tax (Rate) - selling of space/time for advertisement in print media attracts GST @ 5% - Whether 'sale of space for advertisement in print media' is a 'pure service' and whether the exemption under Notification No. 12/2017 is available when billed to local authorities, and whether the exemption applies to advertising agencies. - HELD THAT: - Notification No. 12/2017 exempts pure services (excluding works contracts or composite supplies involving goods) provided to specified government/local authorities in relation to functions entrusted under Articles 243G/243W. The Authority examined the applicant's contention that newspaper material forms a material component and that advertisement rates reflect circulation (material). It held that where the supply involves supply of goods (the newspaper as material) or otherwise is not a pure service, it falls outside the scope of Notification No. 12/2017. On that basis the Authority concluded that the service 'sale of space for advertisement in print media' is not a 'pure service' for purposes of the notification and therefore the exemption is not available to the applicant/advertising agency. The Authority further recorded that the notification is not available to the service provider (advertising agency) in the facts before it. [Paras 8]Sale of space for advertisement in print media is not a 'pure service' for the purposes of Notification No. 12/2017 and the exemption under that notification is not admissible to the advertising agency in the facts before the Authority.Final Conclusion: The Authority ruled that selling of space/time for advertisement in print media by advertising agencies is taxable at 5%; composite supplies comprising selling of space and ancillary designing/composing are to be treated as the principal supply and taxed at 5%; incentives/commission components are taxable at 18%; and the exemption under Notification No. 12/2017 for 'pure services' to governmental/local authorities does not apply to the sale of space in the circumstances considered, nor is that exemption available to the advertising agency on the facts before the Authority. Issues Involved:1. Applicability of GST rate on selling of space/time for advertisement in print media.2. Applicability of GST rate if the advertising company/agency sells space in print media to clients and provides designing/composing services without separate charges.3. Classification of selling space/time for advertisement in print media as a pure service and its exemption from GST.4. Availability of GST exemption for advertising companies if the exemption is available to local authorities.Detailed Analysis:(A) Applicability of GST rate on selling of space/time for advertisement in print media:(A.1) The judgment clarifies that selling of space/time for advertisement in print media is specified under Entry No. 21, Heading 9983 of Notification No. 11/2017-Central Tax (Rate) dated 28-6-2017, which attracts GST at the rate of 5% [2.5% CGST + 2.5% SGST].(B) Applicability of GST rate if the advertising company/agency sells unit of space in print media to clients and provides designing/composing services without separate charges:(B.1) The judgment explains that there are two GST rate slabs for services under Entry No. 21, Heading 9983 of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017: 5% for selling of space/time for advertisement in print media, and 18% for other professional, technical, and business services.(B.2) The judgment discusses different scenarios:(a) If the advertisement agency works on a principal-to-principal basis, buying space from the newspaper and selling it to clients, GST at 5% is applicable on the total amount charged.(b) If the agency sells space on a commission/trade discount basis, GST at 5% applies.(c) If the agency acts as an agent and charges separately, GST at 5% applies.(d) Services other than selling space, such as designing, attract GST at 18% unless part of a composite supply.(e) Volume/value incentives received by the agency attract GST at 18%.(B.3) The judgment identifies the situation as a composite supply (Section 2(30) and Section 2(90) of the Act), where selling of space in print media is the principal supply, and designing/composing services are ancillary. Therefore, the composite supply attracts GST at 5%.(C) Classification of selling space/time for advertisement in print media as a pure service and its exemption from GST:(C.1) The judgment refers to Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017, which exempts pure services provided to government entities under certain conditions.(C.2) For exemption, the service must be pure (without involving goods) and provided to government entities for functions under Articles 243G or 243W of the Constitution.(C.3) The applicant argued that selling space for advertisement in print media includes material (newspaper), thus not qualifying as pure service.(C.4) The judgment clarifies that 'supply' includes all forms of supply of goods and/or services, and the applicant's service involves goods (newspaper), disqualifying it as pure service under the said notification.(C.5) The judgment concludes that selling space for advertisement in print media involves goods, thus not qualifying for exemption as pure service.(D) Availability of GST exemption for advertising companies if the exemption is available to local authorities:(D.1) The judgment states that the exemption under Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017, is not available to advertising agencies as the service involves goods.Order:1. Selling of space for advertisement in print media by advertising companies/agencies attracts GST at 5%. Volume/value incentives are treated as commission and attract GST at 18%.2. Composite supply of selling space in print media and designing/composing advertisements attracts GST at 5%, with selling space as the principal supply.3. Selling space for advertisement in print media is not a pure service, and thus, the exemption under Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017, is not applicable.4. The exemption from GST under Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017, is not available to the applicant.