Service tax on advertising agency

This query is : Resolved

Meghna (Querist)
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31 October 2013 Hello,

Sub: Service tax on service rendered by Advertisement agency

Is the Agency discount/ commission received by advertisement agency from Media/ Broadcaster Liable to service tax??

Please find the example:

Gross Amount - 100
Discount - 15
Net Amount - 85

St on Net amount- 10.31
Total - 95.51

is Rs. 15 Liable to Service tax?
If Yes, will advertisement agency collect the service tax from client?

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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31 October 2013 The media charges service tax after allowing 10/15% discount to the Advertising Agency in lieu of commission. The media usually does not have direct contact with the advertiser. The bill at 85/90% is received by the advertising agency from the media. The agency pays the media the bill plus service tax - in other words the ST paid by the advertising agency is the Input credit available to the agency.

The advertising agency then bills the advertiser on 100% plus ST. The ST collected less input credit is deposited to the credit of the Treasury. Hence effectively the advertising agency pays ST only on its commission income, and the ST is recovered from the client.