GST on Advertising Sector

For the success of every business, you need striking advertisements. Advertisements become an effective communication method for products or services to interact with the user. By means of hoardings, posters, newspapers, magazines, tabloids, videos on television and social media sites, etc., an advertising agency transforms the ideas of sellers into something that catches customers’ attention. In India, GST or Goods and Services Tax are imposed on advertisements in televisions, newspapers, magazines, hoardings, souvenirs, etc. After the implementation of GST, the sectors such as petroleum, e-commerce, tour operators, banking and finance services, education institutions, etc., have reduced their spending on advertisements. Take a look at the details of GST on advertising sector here.

Service Tax became effective on July 1, 2012, and it was applicable on all services other than those covered under the negative list. It was applicable to all kinds of advertising services. The only exception was the sale of space or time for advertisements in print and digital media. The negative list was amended on October 1, 2014, to restrict the non-taxability of the sale of space in print media and all other sales of space or time arrangements in digital media. With the new amendments, Service Tax was imposed on all of them.

GST is imposed on all advertisements in print as well as digital media. GST on advertising sector has a different impact on the print and digital media. 

On notified goods and services, reverse charge mechanism became applicable as per Section 5(3) of the IGST Act, 2017. GST on advertising sector is applicable to any supply of service by someone residing in a non-taxable territory to anyone located in a taxable territory.

For example; 

If a person residing in India buys a service from another person residing in a non-taxable territory, the buyer has to pay the GST to the Government of India as a recipient of service. 

Under GST, advertising companies can claim the credit of taxes paid on the purchase of equipment and high-end electronic goods they use for their business. Earlier it was not applicable. But, they cannot charge GST on services offered, including the advertisement shoots carried out at remote locations where they don’t have an office. 

For example;

An advertising agency registered in Maharashtra shoots an advertisement in Kerala. The hotel would charge CGST + Kerala GST for the accommodation of the entire crew. The advertising agency cannot avail of the hotel accommodation credit since they are registered in Maharashtra. The credit is available only to IGST and CGST + Home State GST.

SAC is the Services Accounting Code (SAC) in which services are classified. The SAC is strictly a six-digit numeric. The first two digits are the same for all services and that is 99. The major nature of service is represented in the next two digits, whereas the last two digits indicate the detailed nature of service. Here is a list of all SAC codes related to advertising services.