Finance Guru

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2011-11-15T01:23:00.000-08:00

Service Tax – Point of Taxation Rules, 2011

2011-07-23T04:11:00.000-07:00

NOTIFICATION NO. 18/2011 – SERVICE TAX, DATED 1-3-2011

In exercise of the powers conferred under clause (a) and clause (hhh) of sub-section (2) of section 94 of the Finance Act, 1994, the Central Government hereby makes the following rules for the purpose of collection of service tax and determination of rate of service tax, namely,–

Short title and commencement

1. (1) These rules shall be called the Point of Taxation Rules, 2011.

(2) They shall come into force on the 1st day of April, 2011.

Definitions

2. In these rules, unless the context otherwise requires,–

(a) “Act” means the Finance Act, 1994 (32 of 1994);

(b) “associated enterprises” shall have the meaning assigned to it in section 92A of the Income-tax Act, 1961 (43 of 1961);

(c) “continuous supply of service” means any service which is provided, or to be provided continuously, under a contract, for a period exceeding three months, or where the Central Government, by a notification in the Official Gazette, prescribes provision of a particular service to be a continuous supply of service, whether or not subject to any condition;

(d) “invoice” means the invoice referred to in rule 4A of the Service Tax Rules, 1994 and shall include any document as referred to in the said rule;

(e) “point of taxation” means the point in time when a service shall be deemed to have been provided;

(f) “taxable service” means a service which is subjected to service tax, whether or not the same is fully exempt by the Central Government under Section 93 of the Act.

Determination of point of taxation

3. For the purposes of these rules, unless otherwise stated, ‘point of taxation’ shall be determined in the following manner, namely:-

(a) a provision of service shall be treated as having taken place at the time when service is provided or to be provided; and

(b) if, before the time specified in clause (a), the person providing the service issues an invoice or receives a payment, the service shall, to the extent covered by the invoice or the payment made thereof, be deemed to have been provided at the time the invoice was issued or the payment was received, as the case may be, whichever is earlier.

Explanation. – For the purposes of this rule, wherever any advance, by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance.

Explanation 2. – For the purposes of this rule, in respect of services taxable under section 66A of the Act, the point of taxation under clause (b) shall be the date on which the invoice is received, or the payment is made, as the case may be, whichever is earlier.

Determination of point of taxation in case of change of rate of tax

4. Notwithstanding anything contained in rule 3, the point of taxation in cases where there is a change of rate of tax in respect of a service, shall be determined in the following manner, namely:–

(a) in case a taxable service has been provided before the change of rate,–

(i) where the invoice for the same has been issued and the payment received after the change of rate, the point of taxation shall be date of payment or issuing of invoice, whichever is earlier; or

(ii) where the invoice has also been issued prior to change in tax rate but the payment is received after the change of rate, the point of taxation shall be the date of issuing of invoice; or

(iii) where the payment is also received before the change of rate, but the invoice for the same has been issued after the change of rate, the point of taxation shall be the date of payment;

(b) in case a taxable service has been provided after the change of rate,-

(i) where the payment for the invoice is also made after the change in tax rate but the invoice has been issued prior to the change of tax rate, the point of taxation shall be the date of payment; or

(ii) where the invoice has been issued and the payment for the invoice received before the change of tax rate, the point of taxation shall be the date of receipt of payment or date of issuance of invoice, whichever is earlier; or

(iii) where the invoice has also been raised after the change of rate but the payment has been received before the change of rate, the point of taxation shall be date of issuing of invoice.

Payment of tax in cases of new services

5. Where a service, not being a service covered by rule 6, is taxed for the first time, then,–

(a) no tax shall be payable to the extent the invoice has been issued and the payment received against such invoice before such service became taxable;

(b) no tax shall be payable if the payment has been received before the service becomes taxable and invoice has been issued within the period referred to in rule 4A of the Service Tax Rules, 1994.

Determination of point of taxation in case of continuous supply of service

6. (1) In case of continuous supply of service, the whole or part of which is determined or payable periodically or from time to time, shall be treated as separately provided at the date on which the payment is liable to be made by the service receiver, if such date is specified in the contract.

(2) If, before the time specified in sub-rule (1), the person providing the service issues an invoice or receives a payment, the service shall, to the extent covered by the invoice or the payment made thereof, be deemed to have been provided at the time the invoice was issued or the payment was received, as the case may be, whichever is earlier.

Explanation 2. – For the purposes of this rule, in respect of services taxable under section 66A of the Act, the point of taxation under sub-rule (2) shall be the date on which the invoice is received, or the payment is made, as the case may be, whichever is earlier.

Determination of point of taxation in case of associated enterprises

7. The point of taxation in respect of associated enterprises shall be the date on which the payment has been made, or invoice under rule 4A of the Service Tax Rules, 1994 has been issued, or the date of debit or credit in books of account of the person liable to pay service tax, whichever is earlier.

Determination of point of taxation in case of copyrights, etc.

8. In respect of royalties and payments pertaining to copyrights, trademarks, designs or patents, where the whole amount of the consideration for the provision of service is not ascertainable at the time when service was performed, and subsequently the use or the benefit of these services by a person other than the provider gives rise to any payment of consideration, the service shall be treated as having been provided each time when a payment in respect of such use or the benefit is received by the provider in respect thereof, or an invoice is issued by the provider, whichever is earlier.

Savings

9. Nothing contained in these rules shall be applicable in case of invoices issued prior to the date from which these rules become effective.

Point Of Taxation Service Tax

2011-07-23T04:00:00.000-07:00

Point of Taxation Rules, 2011- analysis (Service tax on invoice basis/paymet)

Friday 1 April 2011

FREE ITR-1,ITR-2 E FILING -- EPF BALANCE ONLINE --

As you are aware, the Point of Taxation Rules (PTR) were formulated vide Notification No.18/2011-ST dated 01.03.2011. Based on the feedback, certain amendments are being carried out in these rules vide Notification No. 25/2011-ST dated 31.03.2011. The highlights of the changes are discussed in the following paragraphs.

2. While the rules shall come into force from 01.04.2011, an option has been given in rule 9 to pay tax on payment basis, as at present, till 30.06.2011.

3. Rule 3 has been amended to provide that the point of taxation shall be as follows:

(a) Date of invoice or payment, whichever is earlier, if the invoice is issued within the prescribed period of 14 days from the date of completion of the provision of service.

(b) Date of completion of the provision of service or payment, if the invoice is not issued within the prescribed period as above.

The applicability of the rule will be clear from the illustrations in the following table:

S. No.	Date of completion of service	Date of invoice	Date on which payment recd.	Point of Taxation	Remarks
1.	April 10, 2011	April 20, 2011	April 30, 2011	April 20, 2011	Invoice issued in 14 days and before receipt of payment
2.	April 10, 2011	April 26, 2011	April 30, 2011	April 10, 2011	Invoice not issued within 14 days and payment received after completion of service
3.	April 10, 2011	April 20, 2011	April 15, 2011	April 15, 2011	Invoice issued in 14 days but payment received before invoice
4.	April 10, 2011	April 26, 2011	April 5, 2011 (part) and April 25, 2011 (remaining)	April 5, 2011 and April 10, 2011 for respective amounts	Invoice not issued in 14 days. Part payment before completion, remaining later

4. Rule 4 has been amended to clarify that change in the effective rate of tax shall also include change in that portion of value on which tax is payable in terms of an exemption notification or rules made in this regard. It may be noted that an exemption has been granted in value for various services vide Notification No. 1/2006-ST dated 01.03.2006 which has the effect of payment of tax only on a part of the value. Similarly either the values or the rates at which tax is payable are provided under rule 6(7, 7A, 7B or 7C) of the Service Tax Rules, 1994 as well as the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. Thus, whenever these values or the composition rates are changed, it would have the same effect as the change in the rate of duty. It is hereby further clarified that the rate of tax shall also include any other notification which is issued, rescinded or amended and has the effect of altering the taxability of any service.

5. Rule 6 relating to continuous supply of service has been aligned with the revised rule 3 and the date of completion of continuous service has been defined within the rule. This date shall be the date of completion of the specified event stated in the contract which obligates payment in part or whole for the contract. For example, in the case of construction services if the payments are linked to stage-by-stage completion of construction, the provision of service shall be deemed to be completed in part when each such stage of construction is completed. Moreover, it has been provided that this rule will have primacy over rules 3, 4 and 8.

6. Moreover, the following services have been notified as "continuous supply of services" in terms of clause 2(c) of the rules vide notification No. 28/ST-2011 dated 01.04.2011:

(a) Telecommunication service [65(105)(zzzx)]

(b) Commercial or industrial construction [65(105)(zzq)]

(d) Internet Telecommunication Service [65(105)(zzzu)]

(e) Works contract service [65(105)(zzzza)]

Thus these services will constitute "continuous supply of services" irrespective of the period for which they are provided or agreed to be provided. Other services will be considered continuous supply only if they are provided or agreed to be provided continuously for a period exceeding three months.

7. Rule 7 relating to associated enterprises has been deleted. Now that the date of completion of the provision of service is an important criterion in the determination of point of taxation, it shall take care of most of the dealings between the associated enterprises. Thus in case of failure to issue the invoice within the prescribed period, the date of completion of provision of service shall come into effect even if payment is not made.

8. Rule 7 has thus been replaced by a new provision whereby the point of taxation shall be the date of making or receiving the payment, as the case may be. This provision shall apply to the following:

(i) Export of services;

(ii) Persons, where the obligation to pay tax is on the service recipient in terms of rule 2(1)(d) of the Service Tax Rules, 1994 in respect of services notified under section 68(2) of the Finance Act, 1994.

(iii) Individuals, proprietorships and partnership firms providing specified services (Chartered Accountant, Cost Accountant, Company Secretary, Architect, Interior Decorator, Legal, Scientific and Technical consultancy services). The benefit shall not be available in case of any other service also supplied by the person concerned along with the specified services.

9. Export of services is exempt subject, inter alia, to the condition that the payment should be received in convertible foreign exchange. Until the payment is received, the provision of service, even if all other conditions are met, would not constitute export. In order to remove the hardship that will be caused due to accrual method, the point of taxation has been changed to the date of payment. However, if the payment is not received within the period prescribed by RBI, the point of taxation shall be determined in the absence of this rule.

10. In the case of services where the recipient is obligated to pay service tax under rule 2 (1)(d) of Service Tax Rules i.e. on reverse charge basis, the point of taxation shall be the date of making the payment. However, if the payment is not made within six months of the date of invoice, the point of taxation shall be determined as if this rule does not exist. Moreover, in the case of associated enterprises, when the service provider is outside India, the point of taxation will be the earlier of the date of credit in the books of account of the service receiver or the date of making the payment.

11. Changes have also been made in the Service Tax Rules, 1994 vide notification No. 26/2011-ST dated 31.03.2011 and have a close relationship with the Point of Taxation Rules as follows:

(i) The obligation to issue invoice shall be within 14 days of completion of service and not provision of service.

(ii) If the amount of invoice is renegotiated due to deficient provision or in any other way changed in terms of conditions of the contract (e.g. contingent on the happening or non-happening of a future event), the tax will be payable on the revised amount provided the excess amount is either refunded or a suitable credit note is issued to the service receiver. However, concession is not available for bad debts.

12. The credit of input services under rule 4 (7) of the Cenvat Credit Rules has also been liberalized vide notification No. 13/2011-CE (NT) dated 31.03.2011 and the same shall be available on receipt of invoice (except in cases of reverse charge) as long as the payment is made within three months. Even specified persons required to pay tax on cash basis will be able to avail credit on receipt of invoice. Suitable changes have also been made for reversal of credit or payment when the value of service is renegotiated or altered for any reason by refund or issue of a credit note by the service provider. Amendment has also been made in Rule 9 of Cenvat Credit Rules, 2004 by allowing credit on supplementary invoice, except in non-bonafide cases, which may become necessary in certain situations e.g. where the point of tax is the date of payment while the invoice had already been issued e.g. rule 4(b)(i) of Point of Taxation Rules.

13. It is further clarified that the transitional provisions will apply to all invoices issued before 31.03.2011 in so far as taxpayers who switch over to the new rules on 01.04.2011. Those assessees who like to shift to the new rules on 01.07.2011 would have similar protection in respect of invoices issued before the date they switch over to the new rules. The benefit has also been extended to services when provision has been completed before 01.04.2011 or 01.07.2011, as the case may be. It is also clarified that the payments received before the new rules come into force do not require any transitional provisions as they are already required to pay tax on payment basis.

14. It is hoped that with these changes and clarifications all representations on the subject have been dealt with. It is requested that all officers may be advised to explain and clarify the new provisions to taxpayers and assist them in every possible manner in transition to revised rules. Any difficulty experienced in this regard may be brought to the notice of undersigned as soon as possible.

Finance Guru: TDS Rates for F.Y. 2010-11, A.Y. 2011-12

2011-01-25T21:19:00.002-08:00

Finance Guru: TDS Rates for F.Y. 2010-11, A.Y. 2011-12: "TDS Rates: The below given chart is about TDS Rates for f.y.2010-11, a.y. 2011-12 i.e from 1-4-2010 to 31-03-2011. The below give..."

TDS Rate Chart 10-11

2011-01-25T21:19:00.001-08:00

For Assessment Year 2010 – 2011
TDS Rate Chart 10-11 Resident Senior Citizen (65 years or more at any time during the financial year)
Taxable Income	Tax Payable
Upto Rs.240,000	NIL
From Rs.240,001 to Rs.300,000	10% of income above Rs.240,000
From Rs.300,001 to Rs.500,000	Rs.6,000 + 20% of income above Rs. 300,000
Above Rs.500,000	Rs.46,000 + 30% of income above Rs.500,000
Surcharge	NIL (Surcharge has been removed for Individuals)
Education Cess	2% of Total tax payable
Secondary & Higher Education Cess	1% of Total tax payable
TDS Rate Chart 10-11 Resident Women / Female
Taxable Income	Tax Payable
Upto Rs.190,000	NIL
From Rs.190,001 to Rs.300,000	10% of income above Rs.190,000
From Rs.300,001 to Rs.500,000	Rs.11,000 + 20% of income above Rs.300,000
Above Rs.500,000	Rs.51,000 + 30% of income above Rs.500,000
Surcharge	NIL (Surcharge has been removed for Individuals)
Education Cess	2% of Total tax payable
Secondary & Higher Education Cess	1% of Total tax payable
TDS Rates for ay 10-11 All Resident Individuals (Excluding Females & Senior Citizens), any HUF (Hindu Undivided Family), AOP(Association of Persons), BOI (Body of Individuals), Artificial Juridical Person, NRI (non Resident Indian), RNOR (Resident but not ordinarily Resident)
Taxable Income	Tax Payable
Upto Rs.160,000	NIL
From Rs.160,001 to Rs.300,000	10% of income above Rs.160,000
From Rs.300,001 to Rs.500,000	Rs.14,000 + 20% of income above Rs.300,000
Above Rs.500,000	Rs.54,000 + 30% of income above Rs.500,000
Surcharge	NIL
Education Cess	2% of Total tax payable
Secondary & Higher Education Cess	1% of Total tax payable
TDS Rates for ay 10-11 Co-operative Society
Taxable Income	Tax Payable
Upto Rs.10,000	10%
From Rs.10,001 to Rs.20,000	Rs.1,000 + 20% of income above Rs.10,000
Above Rs.20,000	Rs.3,000 + 30% of income above Rs.20,000
Surcharge	NIL
Education Cess	2% of Total tax payable
Secondary & Higher Education Cess	1% of Total tax payable
TDS Rates for ay 10-11 Local Authorities
Taxable Income	Tax Payable
Tax Rate	30% of taxable income
Surcharge	NIL
Education Cess	2% of Total tax payable
Secondary & Higher Education Cess	1% of Total tax payable
TDS Rate chart 10-11 Firms & LLPs (Limited Liability Partnerships)
Taxable Income	Tax Payable
Tax Rate	30% of taxable income
Surcharge	NIL
Education Cess	2% of Total tax payable
Secondary & Higher Education Cess	1% of Total tax payable
TDS Rate chart 10-11 Domestic Companies
Taxable Income	Tax Payable
Tax Rate	30% of taxable income
Surcharge (if taxable income exceeds Rs.10,000,000)	10% of total tax payable
Education Cess	2% of (Total tax payable + Surcharge)
Secondary & Higher Education Cess	1% of (Total tax payable + Surcharge)
TDS Rate chart 10-11 Foreign Companies
Taxable Income	Tax Payable
For Royalties received from Government of India, or an Indian concern in pursuance of an agreement made by it with the Indian concern after 31-Mar-1961 but before 01-Apr-1976, or FEES for rendering technical services in pursuance of an agreement made by it after 29-Feb-1964 but before 01-Apr-1976 and where such agreement has in either case been approved by the central government	50% of this income
Any other taxable income	40% of taxable income
Surcharge (if taxable income exceeds Rs.10,000,000)	2.5% of total tax payable
Education Cess	2% of (Total tax payable + Surcharge)
Secondary & Higher Education Cess	1% of (Total tax payable + Surcharge)
Marginal Relief
The net amount payable as income tax and surcharge shall not exceed the total amount payable as income tax on total income of “Surcharge limit” by more than the amount of income that exceeds the “Surcharge limit“
Note: Surcharge Limit
For Firms, Domestic Companies and Foreign Companies (Rs.10,000,000)

TDS Rates for F.Y. 2010-11, A.Y. 2011-12

2011-01-25T21:17:00.000-08:00

TDS Rates: The below given chart is about TDS Rates for f.y.2010-11, a.y. 2011-12 i.e from 1-4-2010 to 31-03-2011. The below give TDS after all amendments done by the CBDT notifications and circulars. The TDS rates chart has mentioned for allpayment and about payee status to deduct TDS accordingly.

TDS Rates Chart

Rates of TDS for major nature of payments for the Financial Year 2010-11
Particulars				Rates from 1.4.10 to 31.03.2011
*Section*	*Nature ofPayment*	*Criteria forDeduction* *(payment in excess of) upto* *30th June 2010*	*Criteria forDeduction(payment in excess of) w.e.f. 1st July 2010*	*If the recipient is a Company, Co- operative Society, Firm*	*If recipient is an Indivudual or HUF*
194 A	Interest from a Banking Company	Rs.10,000/- p.a	Rs.10,000/-p.a	10.00	10.00
194 A	Interest other than from a Banking Co.	Rs.5,000/- p.a	Rs.5,000/- p.a	10.00	10.00
194 C	Contractors	Rs.20,000/- per contract or Rs.50,000/- p.a	Rs.30,000/-per contract or Rs.75,000/-p.a	2.00*	1.00*
194 H	Commission or Brokerage	Rs.2500/- p.a	Rs.5,000/- p.a	10.00	10.00
194 I	Rent other than Plant, Mach.& Eqp.	Rs.1,20,000/-p.a	Rs.1,80,000/-p.a	10.00	10.00
194 I	Rent of Plant , Machinery & Equipments	Rs.1,20,000/-p.a	Rs.1,80,000/-p.a	2.00	2.00
194 J	Professional Charges	Rs.20,000/- p.a	Rs.30,000/-p.a	10.00	10.00

* No tax is to be deducted in the case the Contractor is in transport businessand PAN is Quoted by him

*Interest of late deposit of TDS is proposed to be increased from 12% p.a to 18% p.a effective from 1st July 2010. Notes: (1) Due date of payments is as under:

(a) Credit/Paid in the month of March – 30th April

(b) Any other case – On or before 7 days from the end of the month in whichdeduction is made.

(2) With effect from 1st April 2010, in case the receiver of the sum does not have PAN, then the deduction has to be made @ 20% or higher rate

Finance Guru: Procedure to Apply Online Import Export Code (IEC)...

2011-01-25T21:15:00.001-08:00

Finance Guru: Procedure to Apply Online Import Export Code (IEC)...: "Policy Circular No.10 (RE-2010)/2009-14 Dated the 31st December,2010Subject:- Provision of additional facility for filing Importer Exporter..."

Finance Guru: Service Tax Implication on Advertising Agencies

2011-01-25T21:15:00.000-08:00

Finance Guru: Service Tax Implication on Advertising Agencies: "ADVERTISING AGENCY Date of Introduction: 01.11.1996 vide Notification No.6/96-ST dt. 31.10.1996. Definition: Advertising agency means any c..."

Finance Guru: Advertisement Agencies Working Patern Useful for A...

2011-01-25T21:14:00.000-08:00

Finance Guru: Advertisement Agencies Working Patern Useful for A...: "Advertising agencies provide a wide variety of services, from the development of the advertisement to its placement in the appropriate medi..."

Advertisement Agencies Working Patern Useful for Auditors

2011-01-25T20:55:00.000-08:00

Advertising agencies provide a wide variety of services, from the development of the advertisement to its placement in the appropriate media. For each of these services, a variety of different payment options are available, from straight fee to commission basis, or some combination of the two. The auditor's job is to understand the compensation formula thoroughly, and to test the agency's records and documentation in support of the charges.

Each agency will have its own unique aspects, based on the type of work the agency has been hired to perform. The internal auditor cannot take a "boiler-plate" approach to the contract but should examine the contracting situation carefully to identify the unique audit needs of that agreement. This will require a high level of audit expertise, and the most seasoned internal audit professionals will need to be involved in the contracting process. Careful planning at the contract stage will allow far more effective and efficient auditing later.

Agency Services

There are three basic types of ad agency services: developing the advertising strategy and material, producing the advertising material, and media placement.

Developing the Advertising

Strategy and Material

At this stage, the agency develops the advertising plans and strategy and identifies the right advertising material for reaching the required marketing objective.

Production

Processes involved in producing advertising material will obviously vary according to the kind of piece it is. The auditor should review the supporting documents for production charges; the controls used to approve and pay invoices the agency receives for production work; and the controls used to ensure that the correct invoices are charged to the job.

Media Placement

The cost of media placement represents one of the most significant elements in an advertising program, and the auditor should give careful attention to this area. The type of media used will determine, to a large extent, the kind of methods the auditor will use in conducting this portion of the audit. One suggested procedure for network television time is to schedule media billings and trace them to appropriate supporting documents (Exhibit 2).

Generally, the agency will invoice the company based on their estimate of the monthly cost for media placement, i.e., network television time. The agency's estimate is based on the media plan established at the beginning of the year by the company's marketing department and the agency. The auditor should review these estimates to see that they fairly reflect the actual invoices received from the agency.

At the same time, the auditor should compare the actual invoices received from the agency to the invoices the agency received from the media. Also, it is a good idea to review the agency's cancelled checks in payment of these media invoices. There will be times when the estimate invoice will not be the same as the actual invoice. In these instances, the agency should either credit the company on the next invoice or charge the company for any additional time purchased. If the estimate charges are consistently and significantly greater than the actual media billings, the auditor should investigate the reasons.

The amount of cash discounts can be significant in media placement. The auditor should verify that the agency is taking advantage of all cash discounts and passing them along to the company in accordance with the agreement.

If the agency is compensated on a fee basis, the auditor should be able to trace the time reported to the company for a given job to the supporting time records at the agency. The review of media placement invoices can be simplified through the use of microcomputer spreadsheets, as illustrated in Exhibit 2.

Agency Expenses

Depending on how the agreement with the agency is written, the company may be responsible for paying out-of-pocket expenses incurred by the agency on behalf of the company. The auditor's review of these out-of-pocket expenses should include the type of expenses incurred, whether the expense are reasonable, and whether the agency has supporting documentation for these expenses.

For example, the contract may require that certain fees and related business costs be reimbursed to the agency. The auditor should be alert for unusual cases to determine the appropriateness and accuracy of the agency charges.

Agency Internal Controls

The auditor should review the agency's controls to be certain they are adequate and can be audited. The review should cover such areas as invoice approval and payment methods; procedures for capturing, tracking, and reporting billable time; procedures governing commissions; and verification of media placement. Without an adequate control system, the agency cannot assure accurate and consistent charges, and the auditor has no basis on which to examine the agency's supporting documentation. Exhibit 4 provides a questionnaire that may be used in assessing controls.

Service Tax Implication on Advertising Agencies

2011-01-25T20:51:00.001-08:00

ADVERTISING AGENCY

Date of Introduction: 01.11.1996 vide Notification No.6/96-ST dt. 31.10.1996.

Definition:

Advertising agency means any commercial concern engaged in providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant.

(Section 65(3) of Finance Act, 1994 as amended)

Taxable Event And Scope Of Service:
Taxable Service means any service provided to a client by advertising agency in relation to advertisement in any manner. (Section 65(72)(e) of Finance Act, 1994 as amended)

Value of Taxable Service:

The value of taxable services in relation to service provided by an advertising agency to a client shall be the gross amount charged by such agency for services rendered in relation to advertisements.

(Section 67 of Finance Act, 1994 as amended)

The above value, includes the gross amount charged by the agency from the client for making or preparing the advertisement material, irrespective of the fact that the advertising agency directly undertakes the making or preparation of advertisement or gets it done through another person as well as the commission received by the agency. However, the amount paid excluding their own commission by the advertising agency, for space and time in getting the advertisements published in the print media (i.e. newspapers, periodicals, etc.) or in its Broadcasting will not be includible in the value of taxable service.

The value includes the charges on account of travel, transportation and hotel stay.

If the market Survey / Research relates to the advertisement, all expenses that are charged from the client on account of Market Survey/Research relating to advertisement are includible in the value of taxable service.

The amount charged by foreign TV channels directly to their clients in foreign currency is not includible as these amounts are not charged by the Advertising Agency from the clients.

(Ministry’s F.No.341/43/96-TRU dt.31.10.1996)

Service Tax would be payable on the gross amount charged by the Advertising Agency from the Clients. The exclusion of cost of paper and printing is not permissible, as it constitutes a component of service provided.

In cases where the advertisement is given by the client in the newspaper through Advertising Agencies, the Service Tax would be leviable on the agency charges of the Advertising Agency, not on the total charges recovered from the clients.

Exemption & Exclusion:

i. The services provided by the Advertising Agencies to United Nations, an International Organization and certain specified Diplomatic Missions are exempted from payment of Service Tax. (Authority: Notification No. 48/98-ST dt.24.04.1998, 44/98-ST dt.22.01.1998, 47/98-ST dt.24.04.1998)

ii DAVP not being a commercial concern is not liable to pay Service Tax in respect of the services rendered by it to other Central Government Departments.

iii. Film/documentary produced by the Film Producer is not leviable to Service Tax provided that the advertising agency makes the payment of Service Tax on including the value of Film/documentary. In case the film producer chooses to charge

the client directly, in that case he has to pay Service Tax

accordingly.

(Ministry’s F.No.341/43/96 TRU dt.31.10.1996)

iv. The Service rendered by local cable Television operators of mere display of Advertisements in the Television Channels Broadcast through Electronic media and charges collected from Customers in respect of the cost of space and time for such display would not be leviable to Service Tax.

(Ministry’s F.No.341/51/2000 TRU dtd.22-11-2000)

v. Release of advertisement directly in the News Papers (not through advertising agency) by the clients, is not covered by Service Tax as service is being provided by the news paper and not the advertising agency.

Case Law:

Hon’ble High Court of Gujarat in the case of Addition Advertising Agency vs. U.O.I. [1998(98) E.I.T.14 (Guj)] held that the subject of tax is not talking on Advertising service but on actual rendering of service and the measure of tax as well as charging provision of tax is based on the gross amount paid for service. It is further held that the tax is not on Advertisement but is on the services rendered with reference to the Advertisement and there is a clear distinction between the Advertisement and Advertising Services and upheld the levy of Service Tax on Advertising Agency.

Service Tax on Advertising Agencies

The representations have been received in this officer with regard to the leviability of Service Tax under the category of Advertising Agency Services in respect of Persons agencies engaged in canvassing for advertisements for which they get commission from the publishers. The persons involved do not provide any service like making, preparing, displaying and exhibiting and only undertaking canvassing for the advertising.

2. The term canvassing may merely involve contacting potential advertisers and persuading them to give advertisement to a particular newspaper/periodical/magazine. The making and preparation of the advertisement namely, drafting of the text, preparation of layout is left either to the advertiser or to newspaper/periodical/magazine. Such a service is known as ‘space selling’. In such cases, since the agency undertaking the job of merely brining the order for an advertisement and does not undertake any further activity. It would not fall within the definition of advertising agency and will not be subjected to service tax.

3. On the other hand, ‘canvassing’ may involve such agency approaching a customer, receiving the texts of the advertisement (including photographs, monograms etc. of the customs), estimating the space that such advertisement would occupy in the newspaper/periodical/magazine, negotiating the price, informing the general layout of the advertisement that would finally appear in such newspaper etc. In such cases the term ‘canvassing’ would certainly fall within the phrase ‘any service provided ----------in any manner connected to making, preparing, displaying and exhibiting’ and would be taxable service.’

4. In view of above, I have been directed to say that if the canvassing is limited to space selling then such services would not be liable to any service tax. However, if canvassing is involving receiving the text of advertisement, estimating the space that such advertisement would occupy in the newspaper/periodical/magazine, negotiating the price, forming the general layout of the advertisement that would finally appear in the newspaper then such activity would be liable to service tax under the category of Advertising Agency Service.

5. The field formations may suitable be informed.

6. Trade Notice may be issued for the information of the trade.

7. The receipt of this Circular may kindly be acknowledged.

Sd/-
(Sanjiv Srivastava)
Deputy Secretary to the Government of India

[F. No. 168/01/2003-CX.4]

ADVERTISING AGENCY

Date of Introduction: 01.11.1996 vide Notification No.6/96-ST dt. 31.10.1996.

Definition:

Advertising agency means any commercial concern engaged in providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant.

(Section 65(3) of Finance Act, 1994 as amended)

Value of Taxable Service:

(Section 67 of Finance Act, 1994 as amended)

The value includes the charges on account of travel, transportation and hotel stay.

The amount charged by foreign TV channels directly to their clients in foreign currency is not includible as these amounts are not charged by the Advertising Agency from the clients.

(Ministry’s F.No.341/43/96-TRU dt.31.10.1996)

Exemption & Exclusion:

ii DAVP not being a commercial concern is not liable to pay Service Tax in respect of the services rendered by it to other Central Government Departments.

the client directly, in that case he has to pay Service Tax

accordingly.

(Ministry’s F.No.341/43/96 TRU dt.31.10.1996)

(Ministry’s F.No.341/51/2000 TRU dtd.22-11-2000)

Case Law:

Procedure to Apply Online Import Export Code (IEC)

2011-01-25T20:37:00.001-08:00

Policy Circular No.10 (RE-2010)/2009-14 Dated the 31st December,2010

Subject:- Provision of additional facility for filing Importer Exporter Code (IEC) applications “on-line”.

1. DGFT is introducing additional facility on DGFT’s website (http://dgft.gov.in) for enabling members of trade to file their IEC applications ‘on-line” with effect from 1.1.2011.

2. Presently, the applications for obtaining an IEC are filed manually with the concerned Regional Authority of DGFT. The applications are filed in hard copy in the prescribed proforma with stipulated documents.

3. The additional facility of filing “on-line” application for obtaining IEC will reduce the transaction cost and time for the applicant, would ensure easy, flexible filing of application and reduce human interface and paper work in the process.

4. The existing system of filing the IEC application manually would simultaneously continue till further orders i.e. the applicant will have an option to prefer his application either manually or “on-line” as per his/her convenience.

5. The following guidelines and procedures are stipulated for the “on-line” system of filing, processing and issuance of IEC:-

(i) The applicant may file the IEC application for “on-line” through the link available on the DGFT’s website.

(ii) The fee in case “on-line” application for IEC has to be paid through Electronic Fund Transfer (EFT) mode only. The EFT link with necessary guidance for making payment through EFT is already available on DGFT’s website.

(iii) The prescribed documents, i.e. the Bank certificate, PAN copy and photograph, are to be scanned and attached with the ‘on-line’ application. Any other relevant documents for example Authority letter in respect of authorized representative, should be attached in the ‘pdf’ format.

(iv) Physical copy of application is not required to be submitted to the concerned Regional Authority(RA) in case of “on-line” applications.

(v) The status of IEC “on-line” application i.e. IEC number granted for accepted applications and deficiency in case of other approved applications will be available on DGFT’s website.

(vi) In case, an “on-line” application is found to be deficient and such deficiencies indicated ‘on-line’, additional information/documents against such deficiencies would need to be submitted physically (in hard copies) to the concerned RA.

(vii) The applicants are advised to be very careful while selecting jurisdictional RA for sending their applications, as selection of a wrong RA would require retransmission of application to the corrct destination and it is likely to cause delay in processing.

(vii) Comprehensive guidelines regarding filing of “on-line” IEC applications are available on DGFT’s server under the IEC “on-line” Help Icon.

6. Members of Trade are encouraged to take advantage of the “on-line” facility for IEC application and RAs are requested to disseminate the information about the facility among the Trade.

Sd/-