Service tax on Adevertiment

This query is : Resolved

GANESH MENDON (Querist)
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08 May 2009 I have found that my client's advertising Agency does'nt charge service tax for advertisement given on News papers.instead of that,Ad agency share the service tax charged to them by news paper agency with our client(charges to our client)this is done becoz they also share discount given by News paper agency.
accordingly our client calculates TDS exclusive of this Service tax.
is this practice legitimate?
if not what wrong in this practice?

SIDDHARTHA SANKAR ROY

SIDDHARTHA SANKAR ROY (Expert)
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08 May 2009 The selling of space and time for advertisement attracts service but exemption has been given in case of print media.

As a trade practice, parties usually approach some ad agency to get their ads published in the print media. The advertising agencies in their turn canvass the ads to the print media for publishing and get a commission (15%)from media and most of the time they actually do not render services of any advertising agency as defined in service tax law.

Vide the Master Circular 96/2007, it has been clarified that such services provided by the ad agencies should be classified under Business Auxiliary Service and not Ad Agency Service and only the commission earned in this process should be subjected to tax.
So in your case the ad agency should charge service tax from the news paper and not your client as it is providing services to the news paper.