In re Time Education Kolkata Private Limited (GST AAAR Telangana)
Advertising services is a specialized service, which includes a host of activities like planning, concept development, creating the basic idea for an advertisement, writing the words, selection of media to be used, design of ads, illustrations, posters, placement of advertisements in media etc. In the instant case, appellant is selling space for advertisement in print media. Further in some cases, apart from selling space, he is also providing art work, which makes the advertisement more appealing and attractive. And such additional activity is done at no extra cost. However, costing comes into picture after classification. Value addition does not have a bearing in classifying the nature of service provided. As such, the processes, the ingredients, quantity of inputs used in supply, the purpose of art work and its impact of appearance of advertisement will have a bearing on the nature of service supplied.
In view of the above, apart from selling the space for advertisement in print media, the appellant is also providing the services of designing or art work as pronounced in their contentions. Advertising in itself is a specialized service, where the act of exhibiting or marketing information about a product or service provided is important, so as to attract the attention of prospective customer who is likely to be a buyer or customer of the advertiser of that product or service provider. Certainly design or art work will have an impact on the content of advertisement, by which the prospective customer is attracted and falls a prey for the proposed business activity. Therefore, addition of art work cannot be called as a mere activity, but a special feature which enhances the appearance of advertisement and draws attraction of prospective customer. The appellant’s contention that art work is provided at no extra cost does not hold any water, in as much as the same is done during the course of furtherance of business. The appellant is already receiving consideration for the service provided and appellant’s claim that no extra cost is charged does not influence the nature of activity. As seen from the explanatory notes under 998663, it is ‘sale of advertising space in print media’ which clearly notify that the vacant space or blank space is for the purpose of advertising only.
From a combined reading of discussion at para 15 above and the explanatory notes, as the appellant is selling space and also providing design or art work, the activity cannot be called as mere selling of advertising space but ‘Advertising Service’ falling under HSN 998361. Therefore, the concept of composite service for deciding the rate of tax, cannot be applied to Advertising Service, which involves host of activities which have their own relevance and importance. The intent of leaving a space empty is for the purpose of advertisement only. In general, advertising means the action of calling something to the attention of public for the purpose of business. As such activities like, design, color, shape, illustrations, etc are equally important. More so the intent of selling the space is for advertisement, as such selling of space cannot be vivisected for the purpose of classification and taxation.
Further, in such specialized services, the nature of service can be decided on the basis of contract or agreement and each contract may have different activities involved. The purpose of advertisement will also have impact on what kind of art work is required. The appellant has not submitted any contract or agreement which tells about the scope of activity involved in printing the advertisement within the given space in print media. As such any additional work or service provided to enhance the appearance of advertisement cannot be called as mere sale of advertising space in print media.
In the light of the foregoing, the ruling of AAR with regard to classification of service under SAC 998366 is set aside and we pass the following:
