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Revenue department clarifies ad agency commission norms

26-October-2001
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Revenue department clarifies ad agency commission norms

The Revenue Department has ruled that commission paid to advertising agencies will not be included in the value of taxable service in respect of broadcasting services.

Broadcasting companies, slapped with a five per cent service tax in July this year, had been unsure about whether the commission to ad agencies was to be included in the taxable service.

The companies had made a representation to the finance ministry claiming that a service tax on the commission amount, if levied on both the ad agency and the broadcasters, would be tantamount to double taxation.

The revenue department has now clarified that service tax is separately leviable on the commission or discounts received by the ad agencies for placing the advertisements in print or electronic media.

The finance ministry, which examined the industry's representations, has clarified that the value of taxable service is the amount received by the broadcaster for providing the service.

According to Ramesh Narayan, president of the Advertising Agencies Association of India, service tax had been imposed on ad agencies three years ago, an imposition which amounted to 0.75 per cent of their revenues. Agencies were not happy about the charge.

The new notification, which concerns the broadcasting companies, clearly stipulates that the 15 per cent commission due to agencies will not be included in the value of taxable service.

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