The government on Wednesday specified that the Goods and Services Tax rate for selling space for advertisements in the print media would be 5%.
If an advertising agency sells that space to a client, then it too pays 5% GST, but if it sells the space on behalf of the newspaper, it would have to pay 18% GST on the commission charged by the paper.
“Query has been raised regarding GST applicable on selling of space for advertisement in print media,” the government said in a statement. “Selling of space for advertisement in print media is leviable to GST at the rate of 5%. 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% on the full amount charged by advertisement agency from the client.”
As an example, the statement added that if a newspaper sells a unit of space for ₹85 to an advertising agency, it would have to pay GST of 5% of ₹85. If the agency sells that unit to a client for ₹100, then it would have to pay GST at 5% on ₹100 and would be able to avail of input tax credits (ITC) for the tax paid by the newspaper.
“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% on the sale commission it receives from the newspaper,” the statement added. “ITC of GST paid on such sale commission would be available to 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 of18%,” the statement said. “If such supplies are part of any composite supply, the rate applicable for the principal supply shall apply.”
“Therefore, everything depends on the terms of the contract between the newspaper, advertisement agency and the client,” it added.