• Understanding of the service

  • The present head of taxable service pertains to services provided under a contract for promotion or marketing of a brand of good, services, event or endorsement of name including trade name, logo or house mark of a business entity. The section also provides the manner in which the said service needs to be performed, as per section the service must be performed by appearing in advertisement and promotional event or carrying out any promotional activity for such goods, service or event.
  • The department/government vide this section envisages to tax the activities of endorsement of products and business by the celebrities. Now-a-days, a lot of corporate are using celebrities to promote their goods and brand. The intent of the corporate are to create an image amongst people that the goods are somehow comparable to the celebrity endorsing it. Activities establishing goodwill or adding value to a brand would fall under this service.

  • Value of Taxable Service

Section 67 read along with Service Tax (Determination of Value) Rules, 2006 provides the manner of determining the value of taxable services on which services tax should be levied.

In respect of Promotion of Brand of goods, services, events, business entity etc Services, no specific provision for determination of taxable value has been provided.  However it has been clarified that the value of taxable services is the total amount of consideration consisting of all components of the taxable service and it is immaterial that the detail of individual components of the total consideration is indicated separately in the invoice. Thus, the value of taxable Promotion of Brand of goods, services, events, business entity etc Service is to be determined in terms of provision of Section 67 read with the prescribed Rules.

  • Accounting codes

  1. Such codes are no longer statutory but used for statistical purpose for the purpose of registration and for payment of tax as specified vide Circular No.165/16/2012 –ST dated 20.11.2012:
    Tax Collection of Service Interest and penalties on such service
    00440604 00440605

  • Abatement

No abatement has been granted to any person liable to pay service tax under the Section.

  • Exemptions available

  1. General Exemption
  • Small Service Provider

Vide Notification No 33/2012-ST, dated 20.06.2012 – Exemption to Small service providers having taxable turnover of less than 10 Lakhs and providing services other than by way of under a brand name.

  • Import of Technology

Vide Notification No. 14/ 2012-ST, dated March 17, 2012 – Exemption in respect of Taxable service involving import of technology, from so much of service tax, as is equivalent to the extent of amount of R&D Cess payable on the said transfer of technology under the provisions of section 3 of the Research and Development Cess Act, 1986.

 

  • To Foreign Diplomatic missions and their personnel

Vide Notification No 27/2012-ST, dated 20.06.2012 – Exemption for all the taxable services provided by any person, for the official use of a foreign diplomatic mission or consular post in India, or for personal use or for the use of the family members of diplomatic agents or career consular officers posted therein.

  • Services by TBI or STEP

Vide Notification No 32/2012-ST, dated 20.06.2012 – All taxable services provided by TBI or STEP have been exempted

  • Services provided to SEZ

Vide Notification No 40/2012-ST, dated 20.06.2012, all taxable services received by a Unit located in a Special Economic Zone (SEZ) or Developer of SEZ for the authorized operations, has been exempted from the levy of whole of the service tax.

  1. Specific Exemptions:

No Specific Exemption had been granted by the government in case of Promotion of Brand of goods, services, events, business entity etc Services.

  • Related Circulars and Notification

  • Relevant extract of ministry’s Circular letter D .O. F. No. 334/1/2010-TRU, dated 26-2-2010

 

  1. Promoting a ‘brand’ of goods, services, events, business entity etc.

4.1  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 sports person, 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 of a reasonably long period, where under 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.

4.2  It is important to note that 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 Tata s) 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.

 

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