Advertising Agencies Guild (AAG), a forum that represents advertising agencies and houses only the CEOs and business owners of such agencies, has expressed concerns over the finance ministry’s proposed GST laws.
In an exclusive conversation with exchange4media, Ranjan Khanna, Spokesperson of the AAG, said, “The GST of 18% applicable to advertising services is extremely high. The advertising business was already hit hard when the service tax rates were raised from 12% to 15%. Now, a rate of 18% would only make advertising services more out of reach for smaller businesses. Moreover, if no GST is applicable on selling of print media space, would that also apply to advertising agencies further selling that same print media space?”
Khanna also questions about the applicability of GST in cases where both the service and the product are offered under a composite rate to the client. He states the example of printing a brochure or an annual report. “While its designing would fall under the services the printing, would the supply qualify as goods sold,” he asks. He adds further that disclosing item rates is not convenient.
The agency forum also has concerns over the application of GST to other offerings of advertising agencies such as ad films, short films, exhibitions and especially events. In such cases, according to the AAG, the ad agencies may only be providing concept, design and supervision services for many of these offerings while the execution itself may be outsourced to another company.
Khanna also said that there are government bodies that currently do not pay service tax to ad agencies despite being clearly covered. He predicts that the situation may worsen if they (government bodies) also don’t pay the GST charged by the agencies. He questions, “Unlike service tax, will service businesses be allowed to claim CENVAT/MODVAT credit on services and utilities consumed by them in their business such as electricity, telephone, computers etc. as these are all an integral part of their service inputs?”
The AAG has been representing advertising sectors in all forms of media for more than a decade. Many of its members have operations across the country, thus offering a nation-wide representation.