Foreign Entity Web-Portal Advertising Space Provision Taxable Under SAC 998365 Notification 11/2017

AAR Karnataka ruled that the applicant's provision of web-portal advertising space to foreign entity constitutes "Sale of internet Advertising Space" classified under SAC 998365 under Heading 9983 (Other professional, technical and business services). The service is taxable per Notification No. 11/2017-Central Tax (Rate) SI.No.21. However, AAR declined to determine taxability as the crucial issue of place of supply - whether inside or outside India - falls outside its jurisdiction. The ruling noted the supplier is located in India, recipient outside India, with consideration received in convertible foreign exchange between separate legal entities.

---

---

Issues:
1. Admissibility of the application for advance ruling.
2. Taxability of providing space on a web portal for advertisements by a foreign entity.
3. Correct classification and tax rate for the services provided.

Admissibility of the Application:
The application for advance ruling was deemed admissible under Section 97(2)(a) of the CGST Act 2017 as it pertained to the "Classification of any goods or services or both."

Taxability of Providing Advertisement Space:
The applicant, an e-commerce company, sought a ruling on the taxability of providing advertisement space on its web portal to a foreign entity, Lenzing Singapore Pte Ltd. The applicant argued that this activity constituted 'export of services' under the IGST Act, as the consideration was received in foreign exchange. However, the authority noted that the determination of the place of supply was crucial in deciding the taxability of the transaction. As this issue fell outside the authority's jurisdiction, no advance ruling was provided on this aspect.

Correct Classification and Tax Rate:
The authority determined that the services provided by the applicant fell under SAC 998365, categorized as "Sale of internet Advertising Space (except on commission)" under Heading 9983. These services were found to be taxable at 9% CGST and 9% SGST, as per SI.No.21 of Notification No. 11/2017-Central Tax (Rate) dated: 28.06.2017.

In conclusion, while the application was admissible for ruling on the classification and tax rate of services provided, the determination of taxability based on the place of supply was deemed outside the authority's purview. The ruling clarified the correct classification and tax rate applicable to the services offered by the applicant on their e-commerce portal for advertisements.

---