GST levy to be 5% on seller of ad space and 18% on agency commission

If an advertisement agency works on a 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 per cent on the full amount charged by the advertisement agency from the client, the finance ministry has clarified.

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 per cent on the sale commission it receives from the newspaper. The input tax credit (ITC) of GST paid on such sale commission would be available to the newspaper concerned, it said.

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 of 18 per cent. If such supplies are part of any composite supply, the rate applicable for the principal supply shall apply, it added.

Therefore, the actual levy of GST would depend on the terms of the contract between the newspaper, advertisement agency and the client, according to a government release.