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The Central Board of Indirect Taxes & Custom (CBIC) on Thursday clarified different taxation related issues concerning advertising services provided to foreign clients by Indian advertisement companies. This is based on GST Council’s recommendation as agreed upon in September 9 meeting.
The first issue is related to whether the advertising company can be considered as an “intermediary” between the foreign client and the media owner. The CBIC said the advertising company does not fulfil the criteria of ‘intermediary’ as it is involved in the main supply of advertising services, including resale of media space, to the foreign client on principal-to-principal basis.
The second issue is whether the representative of foreign clients in India or the target audience of the advertisement in India can be considered as the “recipient” of the services being supplied by the advertising company. The circular clarified that the recipient of the advertising services provided by the advertising company in such cases is the foreign client and not the Indian representative of the foreign client based in India or the target audience of the advertisements.
The third issue is whether the advertising services provided by the advertising companies to foreign clients can be considered as performance-based services as per IGST act. For this, the circular’s response is in the negative. Further, since the recipient of the advertising services in such scenario is the foreign client, who is located outside India, the place of supply of the said services appears to be the location of the said foreign client i.e. outside India and the said service can be considered to be export of services,” said the circular.
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