Know GST applicability on Advertisement in Digital, Print Media & Google Ad sense
Introduction
Advertisement is considered significant for the growth of any business, brand, product or service. With the ever increasing modes of advertisement, taxability of the same also becomes complex. Let us get acquainted with the GST taxability provisions for advertisement services.
How is advertisement services categorized under GST?
GST is applicable to all modes of advertising (sale of space in digital media as well as print media). For taxability purposes advertising services are divided into 2 categories under GST:-
- Advertising through digital media
- Advertisement in print media
What do you mean by advertisement in print media?
Print advertising is a widely used form of advertising. These advertisements appear in newspapers or magazines and are sometimes included as brochures or fliers. GST is leviable on advertisements in print media @ 5%.
For instance, ABC Private Limited is a leading newspaper publishing company. It sells space on its newspaper to a business entity. If the publishing company charges Rs 500,000 for sale of such space then GST payable on the same will be Rs 25,000 (500,000 x 5%).
What do you mean by advertisement in digital media?
Digital advertising is basically delivering promotional content to users through various online and digital channels. The advertisement can be published in various digital mediums like Websites, E-mails or SMS. Advertisement on digital media is liable to GST at the rate of 18%. In these transactions, there are two parties involved:-
- Advertiser – Who wants to advertise a product, idea, service etc
- Publisher – Who publishes these advertisements
For instance, Mr X is a website owner who sells space on his website to a business entity. Mr X charges Rs 200,000 for sale of such space. GST payable on the same will be Rs 36,000 (200,000 x 18%).
What is the tax liability when advertisements are provided through advertisement agencies?
An advertisement agency is basically is a business committed to planning, creating and handling advertisements for its clients.
An advertising agency can work on two basis:-
1.When an advertisement agency operates on a principal to principal basis
When an advertisement agency acquires space from the newspapers/websites and sells the same for advertisement purposes to its clients on its own account), it shall be liable to charge GST.
For instance, suppose the newspaper offers an advertisement space at Rs. 5000 per unit to an agency, and the advertising agency sells the same to its client at Rs. 6000 per unit. In this case, the newspaper shall be liable to charge GST at 5% on Rs. 5000 (Rs. 250); and the advertising agency shall be liable to charge GST at 5% on Rs. 6000 (Rs. 300).
2. When an advertisement agency (acting as an agent) operates on a commission basis
When an advertisement agency acquires space from the newspaper and sells the same for advertisement purposes to clients on behalf of the newspaper, it shall be liable to pay GST at 18% on the sales commission received from the newspaper.
For instance suppose an advertising agency sells space to the client on behalf of a website (not on his own account) for Rs. 2000 and receives a commission of Rs. 300 from the website. In this case, the advertising agency shall be liable to pay GST at 18% on the sales commission of Rs. 300 (Rs. 54).
Who is liable to pay GST if advertisement service is through a registered person outside India?
Under general tax provisions (forward charge mechanism) the liability to pay tax to the government rests with the supplier. However under certain provisions, the liability to pay tax to the government falls on the recipient.
In terms of Notification No. 10/2017- Integrated Tax (Rate), any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient, is taxable under RCM.
Therefore, if a person in India procures advertisement services from a person outside India, the recipient of such service will have to discharge the GST liability to the Government.
For instance, If Mr A procures advertisement services from M/s. XYZ, a firm located in non-taxable territory, then Mr A would be required to discharge the GST liability to the Government as a recipient of service.
Can a person avail the benefit of Input Tax credit on Advertising services?
Under GST the greatest advantage today for all manufacturers, traders and services providers is the utilization of Input Tax Credit (ITC). ITC is the tax that a business pays on a purchase, which can be used to reduce its tax liability when it makes a sale. Advertising Companies invest a huge sum on the purchase of equipment, cameras and high-end electronic goods. They are entitled to claim the credit of taxes paid on such inputs, provided they are registered under GST.
Is GST applicable when bloggers provide space for advertisements?
Let us consider the example of Google Adsense to understand this better. A blogger will make advertisement spaces available. Advertisers will bid to for the ad spaces in a real-time auction. The highest paying ads will be shown on the bloggers website.
A blogger is someone who will provide online space to companies to place their advertisements. Bloggers supply services by providing a platform to the advertisers to display their advertisement hence is considered as a supplier of services.
Services provided by blogger fall under Online information and database Access or Retrieval (OIDAR) services.
To find out whether GST is chargeable, it is important to determine Place of supply.
In accordance with the Section 13(12) of IGST Act, the place of supply of online information and database access or retrieval services shall be the location of the recipient of services (i.e outside India).
Is it covered under export of services?
Section 2(6) of IGST Act 2017 defines Export of Services asthe supply of any service when, the supplier of service is located in India and the recipient of service is located outside India.
Blogger services will be considered as exports as service provider (bloggers) are located in India, recipient (Google Adsense) is located outside India and place of supply is outside India.
According to the provision of Section 16(1)(a) of IGST Act 2017, export of services is zero rated supply. That means, bloggers are providing zero rated services to Google Ad Sense and Google YouTube for running advertisement on their blogs and YouTube videos.
SAC codes of Advertising services
| Group 99836 | Advertising services and provision of advertising space or time |
| 998361 | Advertising Services |
| 998362 | Purchase or sale of advertising space or time, on commission |
| 998363 | Sale of advertising space in print media (except on commission) |
| 998364 | Sale of TV and radio advertising time |
| 998365 | Sale of Internet advertising space |
| 998366 | Sale of other advertising space or time (except on commission) |
