New Delhi, Aug 23 : The government on Wednesday clarified that selling of space for advertisements in print media would attract 5 and 18 per cent Goods and Services Tax (GST), depending on the terms of the contract between the newspaper, advertisement agency and the client.
If the advertisement agency works on principal-to-principal basis, that is, buys space from the newspaper and sells such space for advertisement to clients on its own account, that is, as a principal, it would be liable to pay GST at the rate of 5 per cent on the full amount charged by advertisement agency from the client, the Finance Ministry said in a statement.
For example, if a newspaper sells a unit of space worth Rs 100 to an advertisement agency for Rs 85 (after a trade discount of Rs 15) and the advertisement agency sells the same unit of space to client at Rs 100, then the newspaper would be liable to pay GST at the rate of 5 per cent on Rs 85 (i.e. Rs 4.25) and the advertisement agency would be liable to pay GST on Rs 100 (i.e. Rs 5) and may utilise input tax credit (ITC) of Rs 4.25.
On the other hand, if the advertisement agency sells space for advertisement as an agent of the newspaper on commission basis, it would be liable to pay GST at the rate of 18 per cent on the sale commission it receives from the newspaper. ITC of GST paid on such sale commission would be available to newspaper, the statement said.
So, for example, if an advertisement agency sells unit of space to the client not on its own account but on account of newspaper for Rs 100 and receives commission of Rs 15 for such sale from the newspaper.
In such a case, the advertisement agency shall be liable to pay GST at the rate of 18 per cent on the sales commission of Rs 15 (i.e Rs 2.7), ITC of which shall be available to newspaper for payment of GST at the rate of 5 per cent on Rs 100 (value of space for advertisement sold by the newspaper).
However, if the advertisement agency supplies any service other than selling of space for advertisement, such as designing or drafting the advertisement and such supply is not a part of any composite supply, the same would be liable to tax at the rate of 18 per cent.
If such supplies are part of any composite supply, the rate applicable for the principal supply shall apply, it said.