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Printing of Advertising Materials

SANKAR MAJUMDAR (COST ACCOUNTANT) (111 Points)

20 January 2011

An advertising agency has received an work order to supply glow signs and also to fix them at some locations. The agency has printed the flex for the glow signs and has sold them to the contractee and has paid Vat on it. They have also fixed the same at the locations, charged for it separately and paid service tax on it.

Now the question is whether the ad agency would have to pay Service Tax on the printing and sales of flex also and if so, what is then the purpose of notification no. 12/2003 and 12/2004.

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5 Replies

Ashish Sharma (Service) (1028 Points)
Replied 20 January 2011

Hi Sankar,

I have read above said notifications and find that the exemption is availiable if the amount of Bill is equal to the value of goods. ad agency have to pay the Service Tax on their service Invoice.In my view these notifications are for avoid lie of service tax on transfer of goods with providing service, which are liable to be tax under VAT or CST. Pls. correct if i m not correct.

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U S Sharma (glidor@gmail.com) (21063 Points)
Replied 20 January 2011

Originally posted by : SANKAR MAJUMDAR
	An advertising agency has received an work order to supply glow signs and also to fix them at some locations. The agency has printed the flex for the glow signs and has sold them to the contractee and has paid Vat on it. They have also fixed the same at the locations, charged for it separately and paid service tax on it. Now the question is whether the ad agency would have to pay Service Tax on the printing and sales of flex also and if so, what is then the purpose of notification no. 12/2003 and 12/2004.

u have to maintain TWO series of invoice for such transactions, whereas one would contain the sales consideration only, and later will contain service consideration only , clubbing of both in single invoice will attract the service tax under "works contract" on whole amount also the vat is payable on w/c with cascading effect.

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 20 January 2011

reg service tax notification no 12/2003 and 12/2004, the benefit is available of "materials sales not taxable under service tax" provided the service provider has not availed any cenvat credit.

SANKAR MAJUMDAR (COST ACCOUNTANT) (111 Points)
Replied 21 January 2011

Mr. Sharma, there are numerous Supreme Court Judgements which say that application of Vat/Sales Tax and Service Tax are mutually exclusive i.e. if Vat is charged then service tax can not be charged and vice versa. If Vat is charged on Works contract of printing, the vat is charged on the material element and not on the labour component. However, the definition of works contract under the Service Tax Act does not include printing jobs and in fact no service tax is levied on printing under business auxiliary services vide notification no. 14/2004 and 19/2005. It is obvious that to avail the benefit of notification 12/2003 and 12/2004, no cenvat credit can be availed.

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 21 January 2011

Originally posted by : SANKAR MAJUMDAR
	Mr. Sharma, there are numerous Supreme Court Judgements which say that application of Vat/Sales Tax and Service Tax are mutually exclusive i.e. if Vat is charged then service tax can not be charged and vice versa. If Vat is charged on Works contract of printing, the vat is charged on the material element and not on the labour component. However, the definition of works contract under the Service Tax Act does not include printing jobs and in fact no service tax is levied on printing under business auxiliary services vide notification no. 14/2004 and 19/2005. It is obvious that to avail the benefit of notification 12/2003 and 12/2004, no cenvat credit can be availed.

without going in complexity of service tax and vat cascading effect, there are so many areas where vat and service tax both are applicable alike w/c, viz caterer services who charge vat on food then service tax on serving the same, real estate promoting services, etc.

if we maintain records from scratch to establish that we sell goods, and then only we go for service which is billed separately then we can say that both the transactions are not SAME, but once the both are billed in single invoice, then cascading effect is always present.

supreme count judgements exempts the "materials value" used in services, not our sales values :)