GST on Marketing and Advertising: Tax Implications

Rajdeep Saini

06 Sep, 2022

Nowadays marketing and advertising sector plays an important role in the success of any business. In the normal course of business marketing and advertising is a promotional activity generally using mediums to increase the reach of the business. There have been many changes in this industry in previous decade with an increase in concurrent competition, halting lower priced brands and an increase in the expenditure related to the digital ads.

Marketing services generally include audio and visual activities including television, digital marketing, radio, social media marketing etc. On the other hand, the advertisement services includes ads in newspapers, magazines, radio, television, direct mail, catalogues etc.

Pre-GST on marketing and advertising

Prior to the implementation of the GST the service tax in accordance with the finance act was applicable to the advertising and marketing services.

Marketing

Before GST, the service tax was imposed on the promoting and marketing services of the ‘brand of goods’, business entity and services events.

 According to the section the following activities were taxable under the finance act.

•  Any brand promotion services that could be provided by any individual to any other person.
• That services could be provided directly or indirectly through any entity of business or otherwise.
• Any services which have been provided under a contract; there must be a contractual obligation for the promotion of the brand.
• All the secrecies’ related to marketing or the promotion of brand.
• The brand should be an endorsement of name, services or goods.
• Any services appear in promotional or advertising events which is carrying out any promotional activity of such services, event or goods.

Advertising

The service tax was applicable to all the aspects of the advertising services except time or space for advertisement in some instances. Similarly, the sale of the time slots which exist between programs on the television, the sale of the hoarding space, and such were not taxable. But after October 1, 2014, the negative list was amended to make limit on the non-taxability of the sale of space specifically in print media and with that, all the time and space arrangements were brought under the ambit of service tax^[1]

Post-GST on marketing and advertising sector

GST on advertising

GST is levied in all modes of advertisement such as the sale of space in the print media. Though, this will lead to rise in the cash outflow, the free flow of the credits of the acquirement side leads to the overall cut in the value of advertising.

The following are the two types of advertising medium:

• GST on digital media

In the transaction related to digital media generally there are 2 parties involved- the publisher and the advertiser. The advertiser is the person who wants to advertise his product or idea and on the other hand the publisher is one who publishes these advertisements. The advertisement on digital media is liable to GST at an 18% rate.

• GST on print media

The advertisement made in print media like newspapers.

GST on marketing

Every person who is involved in the supply of goods or rendering of services liable to be registered under GST registration if its turnover in the financial year of taxable service or supply of goods is more than  Rs 20 Lakh. Hence the GST will be applicable to the marketing services.

The following are the GST on the marketing services:

• Rate of GST on marketing services – 18%
• Rate of GST on other Digital Media Advertising – 18%

Input tax Credit on GST on marketing and advertising

The supplier of the marketing and advertising services invests a huge amount of resources in the purchase of high end electronic goods and equipment which are necessary for their business to run smoothly, but they are not permitted to claim the credit of the same. However under GST, they would be allowed to claim the credit of the taxes paid on such electronic goods and equipment.

SAC Code for the marketing services

SAS Code for the Advertising Services

Conclusion

Read our article:Key Implications of the Taxation Bill 2020 on ITR Filing