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April 2015

[2015] 37 STR 597 (Tri.–Mumbai) Grey Worldwide Pvt. Ltd. vs. Commissioner of Service Tax.

By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
Reading Time 1 mins
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Discounts and incentives received by advertising agency are not towards provision of services and therefore, should not be levied to service tax.

Facts:
The appellant, an advertising agency, placed advertisements in print/electronic media on behalf of the advertisers and received agency commission. The demand was on account of volume discount/rate difference received from media, write back of the amounts in respect of payments not claimed by the media.

Held:
It was concluded that assessee was merely coordinating between media and advertiser. Service tax liability was discharged on agency commission received and there was no agreement or contract for promotion of media’s business activities or provision of any service. It was held that incentive received from media without any contractual obligation to render any service cannot be subjected to service tax under the category of “Business Auxiliary Services” as the amounts were discounts and incentives and not as charges for services. Further, in respect of the amounts written back, the same were payable to the media as and when the claim was lodged and therefore it cannot be construed as a consideration for service rendered.

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