Govt clarifies on GST rates for ad agencies offering print media space
New Delhi: Advertising agencies offering print media space to clients will attract a lower goods and service tax (GST) rate if they buy space from media houses and sell it further for a margin rather than rendering their services for a commission, according to a clarification issued by the finance ministry on Wednesday.
The ministry said that while selling space for advertisement in print media is taxable at 5%, the services of advertising agencies are taxed in two different ways depending on the terms of their engagement with the media organisation.
If the advertising agency buys space from a media house and sells it further to its client, keeping a margin for itself, that margin is taxed at 5%, the same rate at which the value of the space sold is taxed. The advertisement agency could claim credit for the GST paid at the time buying print space from the news organisation and set off part of the GST liability on the sale against it.
However, if the ad agency renders its service to the media house as an agent for a commission, its commission is taxed at 18%, and the tax paid by the agency could be claimed as credit by the media organisation for paying the 5% GST liability on the entire value of the space sold, the ministry explained with the help of illustrations.
If the advertisement agency supplies any service other than selling of space for advertisement, such as designing or drafting the advertisement, and such supply is not a part of any composite supply, the same would be liable to tax at 18%, said the ministry.