SALE OF ADVERTISING SPACE OR TIME SERVICES

[Dr. Sanjiv Agarwal]

Service tax has been imposed on sale of advertising space or time services by the Finance Act, 2006 with effect from 1st May, 2006 videNotification No. 15/2006-STdated 25.4.2006. The gross amount charged by service provider to or total consideration received by a person in relation to sale of advertising space or time services is chargeable to service tax.

Meaning of Sale of Space or Time for Advertisement

Explanation-I to section 65(105)(zzzm) (as inserted by Finance Act, 2006) defines ‘sale of space or time for advertisement’ as under —

“sale of space or time for advertisement” includes,—

(i) providing space or time, as the case may be, for display, advertising, showcasing of any product or service in video programmes, television programmes or motion pictures or music albums, or on billboards, public places, buildings, conveyances, cell phones, automated teller machines, internet;

(ii) selling of time slots on radio or television by a person, other than a broadcasting agency or organisation; and

(iii) aerial advertising.

Sale of space or time for advertisement includes providing space or time, as the case may be, for display, advertising, showcasing of any product or service in video programmes, television programmes or motion pictures or music albums, or on billboards, public places, buildings, conveyances, cell phones, automated teller machines, internet; selling of time slots on radio or television by a person, other than a broadcasting agency or organisation; and aerial advertising.

Print media means and includes book and newspaper for this purpose.

Saleof advertising space or time means that such time or space should be used for the purpose of advertisement. It may include any one or more of the following applications —

(a) display

(b) advertising

(c) showcasing of any product or service in —

— video programme

— television programme

— motion pictures

— music albums

— bill boards

— public places

— buildings

— conveyances

— cellphones

— automated teller machine

— internet

(d) sale of time slot on radio or television by person other than broadcasting agency.

(e) aerial advertising

Meaning of Print Media

(Prior to Finance Act, 2007 w.e.f. 1-6-2007)

Explanation 2 to Section 65(105)(zzzm) defines print media as under –

“print media” means “book” and “newspaper” as defined in sub-section (1) of section 1 of the Press and Registration of Books Act, 1867.

Amendments made by Finance Act, 2007 (w.e.f. 1-6-2007)

Explanation (2) to section 65(105) (zzzm) has been substituted by Finance Act, 2007 as under –

Explanation 2.— For the purposes of this sub-clause, ‘‘print media’’ means,—

(i) “newspaper’’ as defined in sub-section (1) of section 1 of the Press and Registration of Books Act, 1867;

(ii) ‘‘book’’ as defined in sub-section (1) of section 1 of the Press and Registration of Books Act, 1867, but does not include business directories, yellow pages and trade catalogues which are primarily meant for commercial purposes.

Print media is defined to include book and newspaper as per section 1(1) of Press and Registration of Books Act, 1867.

The Explanation to section 65(105)(zzzm) has been substituted to redefine ‘book’. Accordingly, ‘book’ shall mean the same as per Press and Registration of Books Act but shall not include business directories, yellow pages and trade catalogues which are primarily meant for commercial purposes. Thus, in case of following books, sale of space for advertisement shall be a taxable service —

— business directories

— yellow pages directory (classified business ones)

— trade catalogues

Telephone directories are not business directories. Similarly, directories of clubs, associations, professional bodies etc. are not considered to be trade or business directories. Moreover, such directories are not primarily meant for commercial purposes though their commercial use cannot be denied. Service tax will be attracted if both conditions are satisfied, i.e., it must be a business directory or catalogue and it must be primarily meant for commercial purposes.

CBEC vide Circular No. 334/1/2007-TRU dated 28.2.2007 has clarified as under —

“Sale of space or time for advertisement [Section 65(105)(zzzm]

Definition of the term “Book” is being amended so as to exclude business directories, yellow pages and trade catalogues which are primarily meant for commercial purposes from the scope. Consequently sale of space for advertisement in such publications will also be leviable to service tax under this service.”

Meaning of Advertisement [Section 65(2)]

Section 65(2) defines what is meant by advertisement. For details, refer to

Topic 30 of the Book.

Taxable Service

(Prior to Finance Act, 2007 - 1-6-2007)

Section 65(105)(zzzm) defined taxable service as under —

“Taxable service” means any services provided or to be provided to any person, by any other person, in relation to sale of space or time for advertisement, in any manner; but does not include sale of space for advertisement in print media and sale of time slots by a broadcasting agency or organisation.

For a service to be taxable, service, following conditions should be satisfied —

(a) Service should be provided by any person to any person.

(b) Service should be in relation to sale of space or time.

(c) Such sale of space or time should be for advertisement in any manner (see definition).

(d) Taxable service will not include sale of space for advertisement in print media.

(e) Taxable service will not include sale of time slots by a broadcasting agency or organization.

(f) Taxable service may be any service but in relation to sale of time slot or space.

(g) Service can be provided in any manner.

Thus, sale of space in print media or sale of time slot by broadcasting agency are not taxable services. If a sale of time slot is made by other person, it will attract service tax.

The levy of service tax on sale of space or time for advertising services is a result of various Tribunal and Court decisions stating that sale of space or time in print media or electronic media is not an advertising agency service in the existing definition and more importantly, in the recent advance ruling in google case. Through this service, all advertisements other than through print or electronic media are covered in the scope of taxable service w.e.f. 1-5-2006.

In October 2005, CBEC had issued a draft Circular No. 341/43/2005-TRU dated 10.10.2005 intending that service tax shall be levied on the gross amount paid by the client to advertising agency on the amount paid by agency to media for booking space or time. This could not happen and the draft Circular was withdrawn vide Circular No. 341/43/2005-TRU dated 7.12.2005.

In Advertising Club v. Central Board of Excise & Customs 2001 -TMI - 33 - HIGH COURT (MADRAS), it was held that service tax on services provided by the advertising agency is distinct from flashing an advertisement in press media or electronic media. When person gets his advertisements flashed in the press or electronic media, it cannot be said to be a service provided by media. There is nothing done except flashing a prepared advertisement.

Where respondent was permitting display of advertisement on its site and raising bills for advertising service to their clients, they were liable to pay service tax in respect of rental charges, it was held that mere sub-letting site to an advertisement agency without providing services of the nature define under the Finance Act would not make the respondent liable to pay service tax. [CCE, Ludhiana v. Azard Publications (2004) 167 ELT 59 (Tribunal, Delhi)].

In CCE, Kolkata v. The Incoda, 2004 -TMI - 176 - (CESTAT, KOLKATA), it was held that where respondents hired space in metro railway coaches and in turn provided space to its clients for advertisement, it did not tantamount to an act of advertising agency. Also see Commissioner v. Azad Publications, 2004 (167) ELT 59 (Tribunal, Delhi).

In Re Able Adds Pvt. Ltd. (2005) 187 ELT 133 (CCE (Appeals) Chennai), it has been held that space selling/canvassing for advertisement and passing on advertisements so collected/received from the advertisers to the publisher of newspaper/journal on a commission basis does not fall under category of advertising agency services but under business auxiliary services, taking into consideration the provisions of section 65A(2) relating to classification of taxable services.

In Bhopal City Link Ltd v. CCE Bhopal 2008 -TMI - 33042 - (CESTAT, NEW DELHI), space booked in public transport system run and space allowed in buses for display of advertisement was held to be a taxable services under sale of space or time for advertisement.

Authority for Advance Rulings (AAR) had pronounced a ruling on the application of Google Online India Pvt. Ltd. [Re. Google Online India (Pvt.) Ltd. 2005 -TMI - 296 - (Authority for Advance Ruling, New Delhi)]. The ruling appears to be a bold one as it states that space selling on websites or providing space for display or exhibition of advertisements is enough to satisfy the definition of advertisement agency and the fact that selling time slot for advertisement on the website has not been specifically included in the definition of taxable service will not mitigate against classifying such a service under the category of advertising services. Thus, it ruled that activity of providing or selling space for advertisement or website (electronic mode, portal etc.) which includes assistance in preparation, display and exhibition of such advertisement is most appropriately classifiable as advertisement service under section 65(105)(e) of the Finance Act, 1994.

In Re Google’s Online India Pvt. Ltd. 2005 -TMI - 296 - (Authority for Advance Ruling, New Delhi), the applicant, even by merely providing or selling space for display or exhibition of an advertisement, would be providing a service to the clients or advertisers. It, therefore, falls under the definition of advertising agency. The making, preparing, displaying or exhibiting are alternative and not cumulative and any service provided in connection with any one of these would render it within the ambit of advertising agency. Thus,AAR ruled that the applicant would not merely be selling the slot on website but would also be assisting in preparation of advertisement and displaying/exhibiting advertisement. Thus, it squarely falls within the meaning of advertising agency. It is also clear that it is proposing to provide to a client service in relation to making, preparation, display and exhibition of an advertisement. In fact, without prejudice to the factual position stated, any service to a client connected with even any one or more of the four activities mentioned, would be sufficient to bring the commercial concern providing such service, within the ambit of the definition of advertising agency. This has been made clear in the Ministry of Finance,

Letter F. No. 341/43/96-TRU dated 31.10.1996 in the context of the definition of ‘Advertising Agency’ to the effect that the “scope of the service which is included in the tax net extends not only of any service connected with making, preparation of advertisements but also includes any services connected with display or exhibition of advertisements.”

Amendment made by Finance Act, 2007 (w.e.f. 1-6-2007)

Definition of the term “Book” has been amended so as to exclude business directories, yellow pages and trade catalogues which are primarily meant for commercial purposes from the scope. Consequently, sale of space for advertisement in such publications will also be leviable to service tax under this service.

Person Liable

Any person providing sale of space or time for advertisement shall be treated as person liable and be an assessee for service tax purposes.

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