FAQs on Promotion of Brands of Goods, Services, Events, etc.

1. Which type of services are covered within purview of taxable service of promotion of brand of goods, service, events, etc.?

Many companies/corporate houses (for example Sahara, ITC or Tatas) are associated with a range of activities including production/marketing/sale of goods, provision of services, holding of events, undertaking social activities, etc. If the brand name/house mark, etc. is promoted by a celebrity without reference to any specific product or services, etc., it is difficult to classify it under BAS. Such activities, like mere establishing goodwill or adding value to a brand would fall under this newly introduced service.

The activity of promotion of a 'brand' of goods, services, events, business entity, etc. has been brought within the purview of service tax net by Finance Act, 2010. The activities, like mere establishing goodwill or adding value to a brand would fall under this category.

2. What is the effective date of levy of service tax on the taxable service of promotion of brand of goods, service, events, etc.?

Service tax on the activity of promotion of a brand of goods, services, events, business entity, etc., is chargeable with effect from 1-7-2010.

3. What is the meaning of taxable service in relation to the taxable service of promotion of brand of goods, service, events, etc.?

4. How is the taxable service of promotion of brand of goods, service, events, etc., provided?

The taxable service of promotion or marketing of a brand of goods, service, events, etc. is provided by appearing in advertisement and promotional event or carrying out any promotional activity for such goods, service or event.

5. Is the taxable service of promotion of brand of goods, service, events etc., provided not under a contract, chargeable to service tax?

No. For the purpose of levy of service tax under this category it is necessary that service is provided under a contract for promotion or marketing of a brand of goods, service, event or endorsement of name, including a trade name, logo or house mark of a business entity. Hence, the taxable service of promotion of brand of goods, service, events, etc. which is not provided under a contract is not chargeable to service tax.

6. How is the taxable service of promotion of brand of goods, service, events, etc. different from the advertising agency service?

Commercial advertisement has taken different shapes and forms. Apart from the advertisements in print and visual media and sponsorship, one of the recent trends is to advertise a brand (i.e. of goods, services, events, business houses bearing a particular brand name or house name) usually by using a celebrity (such as sportsperson, film stars, etc.) to associate him/her with the brand. The intended impression that is created in the minds of customers or users is that the products and services of that brand have the level of excellence comparable to that of the celebrity. Unlike in case of advertisements using models, a brand ambassador works under a contract for a reasonably long period, whereunder he is not only required to advertise the goods or service in different media but also to attend promotional, product launching events, make appearances in public activities related to the brand or the brand holder or use such goods or services in public. The contractual amounts are substantial and it may not only involve an individual celebrity but a group of celebrities such as a cricket team or the actors of a successful film.

7. What is the difference between taxable service of promotion of brand of goods, service, events, etc. and business auxiliary service?

Promotion or marketing of sale of goods produced, provided or belonging to a client and promotion or marketing of services provided by the client are already covered under 'Business Auxiliary Services' (BAS). Such activities would continue to remain classified under BAS. The difference between the services classifiable under BAS and the newly proposed service is that the latter has a wider coverage in the sense that mere promotion of a brand would attract tax under this service even if such promotions cannot be directly linked to promotion of a particular product or service. Many companies/corporate houses (for example Sahara, ITC or Tatas) are associated with a range of activities including production/marketing/sale of goods, provision of services, holding of events, undertaking social activities etc. If the brand name/house mark, etc. is promoted by a celebrity without reference to any specific product or services, etc. it is difficult to classify it under BAS. Such activities, like mere establishing goodwill or adding value to a brand would fall under this newly introduced service.

8. What would be value of taxable service where provision of service is for consideration in money terms?

In a case where the provision of service is for a consideration in money, the value of taxable service shall be the gross amount charged by the service provider for such service provided or to be provided by him.

9. What would be the value of taxable service where provision of service is for a consideration not wholly or partly consisting of money?

In a case where the provision of service is for a consideration not wholly or partly consisting of money, the value of taxable service shall be the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration.

10. What would be the value of taxable service where the value cannot be determined in accordance with para (8) above?

In a case where the value cannot be determined in accordance with para (8) above, the service provider shall determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.

11. How is value of taxable service determined if the service provider does not charge service tax separately or if the service receiver pays only the taxable value?

In terms of rule 4A of the Service Tax Rules, 1994, service tax is required to be indicated separately in the bill or invoice. However, in a case where the service provider does not charge service tax separately or if the service receiver pays only the taxable value, it has been provided in sub-section (2) of section 67 that where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged.

12. Is the amount received in advance towards provision of a taxable service chargeable to service tax?

According to sub-section (3) of section 67, the gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. Hence, the amount received in advance towards provision of a taxable service would be chargeable to service tax.

13. Who is liable to pay service tax in relation to taxable service of promotion of brand of goods, service, events, etc.?

In respect of taxable service of promotion of brand of goods, services, events, etc., the service provider is liable to pay service tax.

14. Is taxable service provided or to be provided from outside India to recipient in India chargeable to service tax?

Yes. Taxable service provided or to be provided from outside India to a recipient in India is chargeable to service tax.

15. When is taxable service provided or to be provided from outside India to a recipient in India not chargeable to service tax?

The taxable service provided or to be provided from outside India to a recipient in India is not chargeable to service tax when the recipient of service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce.

16. When would the taxable service of promotion of brand of goods, services, events, etc. be deemed to have been imported into India?

The taxable service of promotion of brand of goods, services, events, etc. is deemed to have been imported into India when such service is received by a recipient located in India for use in relation to business or commerce.

17. Is service tax leviable to export of a taxable service?

No. Service tax is not leviable on export of any taxable service, subject however to the following conditions, namely :

18. What is export of service in relation to taxable service of promotion of brand of goods, services, events, etc.?

In relation to taxable service of promotion of brand of goods, services, events, etc., the export of service means when such service is provided in relation to business or commerce, provision of such services to a recipient located outside India and when such services is provided otherwise, provision of such service to a recipient located outside India at the time of provision of such service.

19. What are the accounting codes for payment of service tax in relation to taxable service of promotion of brand of goods, service, events, etc.?

The accounting codes for payment of service tax in relation to taxable service of promotion of brand of goods, service, events, etc. are as under :

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