The circular provides clarifications regarding the place of supply for advertising services provided by Indian advertising companies/agencies to foreign clients. This is to address issues where some field formations were considering the place of supply as within India, thereby denying export benefits to these companies.
Key Issues Addressed
- Intermediary Status of Advertising Companies
- Question: Whether Indian advertising companies can be considered as intermediaries between foreign clients and media owners under Section 2(13) of the IGST Act.
- Clarification: Advertising companies are not intermediaries as they provide comprehensive services on a principal-to-principal basis to foreign clients. They are involved in the main supply of advertising services, including the resale of media space, and thus, the place of supply cannot be linked to the location of the supplier.
- Recipient of Services
- Question: Whether the representative of the foreign client in India or the target audience in India can be considered the recipient of the services under Section 2(93) of the CGST Act.
- Clarification: The recipient of the advertising services is the foreign client who pays for the services. The representative in India or the target audience cannot be considered the recipient.
- Performance-Based Services
- Question: Whether the advertising services provided to foreign clients can be considered performance-based services under Section 13(3) of the IGST Act.
- Clarification: The supply of advertising services does not require the physical presence of the recipient with the supplier. Therefore, these services cannot be considered performance-based under Section 13(3).
Determination of Place of Supply
- The place of supply for advertising services provided to foreign clients is determined as per Section 13(2) of the IGST Act, which is the location of the recipient of the services. Since the recipient is located outside India, the place of supply is outside India, qualifying these services as exports.
Special Cases
- If the advertising company acts merely as an agent for the foreign client in engaging with media owners, the company is considered an intermediary. In such cases, the place of supply is the location of the supplier (i.e., the advertising company in India).
Implementation
- Field formations are requested to issue suitable trade notices to publicize the contents of this circular.
- Any difficulties in implementing the circular should be reported to the Board.