NO SERVICE TAX ON SELLING OF SPACE OR TIME SLOTS FOR ADVERTISEMENTS

[Dr. Sanjiv Agarwal]

Clause (g) of Section 66(D) of Finance Act, 1994 stipulates that "Selling of Space or Time Slots for Advertisements other than Advertisements Broadcast by Radio or Television" shall be in the Negative List and as such, no Service Tax will be levied.  

This entry in negative list should qualify the following tests –

a)  involves selling of space (in case of print media),

b) involves selling of time slots (in case of electronic media),

c) purpose of selling time slots/space to be for advertisements (publicity/sales promotion, awareness etc.),

d) excludes broadcast by radio or television (i.e., broadcast will be taxable). 

Broadcasting per se is not is negative list. Sale of space or time for advertisement to be broadcast on radio or television and sale of time slot by a broadcasting organization shall be taxable.

‘Advertisement’ has been defined in section 65B(2) of the Act as form of presentation for promotion of, or bringing awareness about, any event, idea, immovable property, person, service, goods or actionable claim through newspaper, television, radio or any other means but does not include any presentation made in person. 

Broadcasting under Section 2(c) of Prasar Bharti (Broadcasting Corporation of India) Act, 1990 is defined as under — 

“the dissemination of any form of communication like signs, signals, writings, pictures, images and sounds of all kinds by transmission of electro-magnetic waves through space or through cables intended to be received by the general public either directly or indirectly through the medium of relay stations and all its grammatical variations and cognate expressions shall be construed accordingly”.

Thus, the essential features of broadcasting are –

i)  There must be dissemination of sign or signals, writings, pictures, images and sounds.

ii) Communication should be through electro-magnetic waves through space or through cables.

iii) Communication is intended to be received by general public.

iv) The communication may be received either directly or indirectly.

v) The communication is received through the medium of relay stations. 

Sale of space of time for advertisements not including sale of space for advertisement in print media and sale of time by a broadcasting agency or organization is currently taxed under clause (zzzm) of sub-section (105) of the Finance Act, 1944. 

In the earlier definition, “sale of space or time for advertisement” included —

(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.

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.

According to CBEC (vide TRU Letter No. 334/1/2012 dated 16.3.2012), non-taxable services include —

a) Sale of space for advertisement in print media,

b) Sale of space for advertisement in billboards, public places, buildings, conveyances, cell phones, automated teller machines, internet,

c) Aerial advertising,

d) presentation made in person.

Services provided by advertising agencies relating to preparation of advertisements will not be covered in the negative list relating to sale of space for advertisements. Services provided by advertisement agencies relating to making or preparation of advertisements would not be covered in this negative list entry and would thus be taxable. This would also not cover commissions received by advertisement agencies from the broadcasting or publishing companies for facilitating business, which may also include some portion for the preparation of advertisement. taxmanagementindia.com

In this service, there could be cases of bundled service (composite services). In case a person provides a composite service of providing space for advertisement that is covered in the negative list entry coupled with taxable service relating to design and preparation of the advertisement, its taxability be determined as follows —

• This would be a case of bundled services taxability of which has to be determined in terms of the principles laid down in section 66F of the Act.
• Bundled services have been defined in the said section as provision of one type of service with another type or types of services.
• If such services are bundled in the ordinary course of business then the bundle of services will be treated as consisting entirely of such service which determines the dominant nature of such a bundle.
• If such services are not bundled in the ordinary course of business then the bundle of services will be treated as consisting entirely of such service which attracts the highest liability of service tax.

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