Place of Supply of Advertising Services

[ROHIT GOEL]

Dear sir,

Our client is availing services of advertising where their ads are being shown at various Cinema Halls before beginning of broadcast of movie. These cinema halls are based in Chandigarh and Punjab, the client is based in Haryana and the advertiser is registered in Punjab.

The advertiser is issuing GST invoice by charging IGST and Place of supply as Haryana i.e. location of our client.

Whether:

A) Place of supply in this case is correct? Or the Place of supply should be location of cinema hall where Advertisement is broadcast?

B) Whether ITC claim of our client is incorrect ?

Looking forward to hear your views.

[Amit Agrawal]

It is my presumption that your client is not 'the Central Government, a State Government, a statutory body or a local authority'.

It is my understanding that such advertisements are not "broadcasted" per se (i.e. through telecommunication services including data transfer, broadcasting, cable and direct to home television services). But if I understand correctly, these cinema hall owners / operators display these advertisements on their screen/s using their own internal at-site facilities before start of the movie.

Against above background, my views are as under:

Answer to Question A: Place of Supply for subject transaction is Haryana

Answer to Question B: Your client can avail ITC.

All above are strictly personal views of mine and the same should not be construed as professional advice / suggestion.

[ROHIT GOEL]

Dear Amit Ji,

Thank you for reply.

Just a follow up, whether the transaction of display of advertisements in Movie halls would amount to services in relation to immovable property u/s 12(3) of IGST Act 2017 and may thus make the place of supply as location of the immovable property?

[Amit Agrawal]

I understand it can be an area of concern, dispute and litigation. But, my personal views for shared facts are as follows:

A. Providing Advertising services in a Cinema-Hall are NOT directly in relation to an immovable property in my humble view. This is subject to my presumption that the subject ads are NOT directly concerned with any immovable property of your client For example, If concerned Ads are for selling project/s by a builder-client, then, such ads will be directly in relation to the immovable property/ies. But if these ads for selling a ''goods" manufactured by your client, then, these ads are directly in relation to those "goods".

B. If you notice Section 12 (14) of the IGST Act, 2017, it specifically deals with 'advertisement services provided by way of dissemination in the respective States or Union territories as may be'. However, this clause is applicable only when service-recipient is 'the Central Government, a State Government, a statutory body or a local authority meant for the States or Union territories'.

C. In my view, Display of these advertisement in a Cinema-Hall is more akin to services linked with 'Place of Performance'. And Section 12 (4) does not cover 'Advertisement Services'.

D. Lastly (& most importantly) and assuming that said service-provider is wrong at his end in treating place of supply as 'Haryana' (instead of say 'Punjab'), I do not think that that is a relevant factor to legally deny ITC to your client.

All above are strictly personal views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

Surely the advertisement services are not in relation to immovable property

AI Summary

Place of supply of advertising services: recipient location governs GST treatment and preserves input tax credit entitlement. Place of supply for on-site cinema advertising displayed by cinema operators is the location of the service recipient or place of performance, not the immovable property's location, provided the advertisement is not directly related to sale or development of that immovable property; Section 12(14) (government advertisement provision) is distinguishable. An issuer charging IGST with place of supply as the recipient's location aligns with this characterisation, and such a mischaracterisation by the provider would not, on the presented facts, deny the recipient the ability to claim Input Tax Credit.