firm which is an advertising agency

[Dalia Felix]

M/s ABC is a proprietary concern, the  list of the services/ products provided by which are:            

• Website designing
• Videos
• Print materials like pamphlets, posters, mugs, brochures etc.
• Newsletters intended for circulation by customers within their respective companies

What are the tax implications while a lumpsum amount is charged for the end product? Please note that ABC will be doing the designing part only and the production will be outsourced to outside vendors like printers/ videographers etc.

Please analyze the applicability of service tax/VAT in this situation.

AI Summary

Service Tax Applies to Total Lumpsum Charged by Advertising Agency; CENVAT Credit Available for Outsourced Services. An advertising agency, operating as a proprietary concern, provides services such as website designing, videos, print materials, and newsletters, while outsourcing production to vendors. A query was raised regarding the tax implications when charging a lumpsum amount for these services. The response clarified that service tax applies to the entire lumpsum amount billed by the agency, even if production is outsourced. The agency can claim CENVAT credit for outsourced services. To avoid complications, it's recommended that outsourced services be billed directly to the client, with the agency billing separately for its services.