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Circular No. 230/24/2024-GST
F. No. CBIC-20001/6/2024-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
***
New Delhi, dated the 10
th
September, 2024
To,
The Principal Chief Commissioners/ Chief Commissioners/
Principal Commissioners/ Commissioners of Central Tax (All),
The Principal Directors General/ Directors General (All).
Madam/Sir,
Subject: Clarification in respect of advertising services provided to foreign
clients–reg.
References have been received from the trade and industry requesting for clarification
regarding advertising services being provided by Indian advertising companies/agencies to
foreign entities, as some of the field formations are considering the place of supply of the
said services as within India, thereby denying the export benefits to such advertising
companies.
1.2 In view of the difficulties being faced by the trade and industry and to ensure
uniformity in the implementation of the provisions of the law across field formations, the
Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and
Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), hereby clarifies the issues
in succeeding paragraphs.
2. Issue in Brief
2.1 A foreign company or firm hires an advertising company/agency in India for
advertisement of its goods or services and may enter into a comprehensive agreement with
the advertising company/agency encompassing all the issues related to advertising services
ranging from media planning, investment planning for the same, creating and designing
content, strategizing for maximum customer reach, the identification of media owners,
dealing with media owners, procuring media space, etc. for displaying/broadcasting/printing
of advertisement including monitoring of the progress of the same. In such a case, the
advertising agency provides a one stop solution to the client who outsources the entire
activity to the agency.
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2.2 In this scenario, media owners raise invoice to the advertising agency for inventory
costs, which are then paid by the advertising agency. Subsequently, the advertising agency
raises invoice to the foreign client for the rendered advertising services and receives the
payments in foreign exchange from the foreign client. In this regard, clarification has been
sought as to:
a. Whether the advertising company can be considered as an “intermediary”
between the foreign client and the media owners in terms of section 2(13) of
Integrated Goods and Services Tax Act, 2017 (herein after referred to as the
“IGST Act”), thereby resulting in determination of place of supply under
section 13(8)(b) of the IGST Act?
b. Whether the representative of foreign client in India or the target audience of
the advertisement in India can be considered as the recipient of the services
being supplied by the advertising company under section 2(93) of CGST Act?
c. Whether the advertising services provided by the advertising companies to
foreign clients can be considered as performance-based services as per section
13(3)of the IGST Act?
3. CLARIFICATION:
3.1 Issue 1 -Whether the advertising company can be considered as an “intermediary”
between the foreign client and the media owners as per section 2(13) of IGST Act?
3.1.1 As per section 2(13) of IGST Act, read with Circular no. 159/15/2021-GST dated
20.09.2021, a broker, agent or any other person who arranges or facilitates the main supply
of goods or services or both or securities and has not involved himself in the main supply on
his own account is considered as intermediary.
3.1.2 In the instant scenario, it is observed that the foreign clients enter into a
comprehensive agreement with advertising companies/agencies in India and outsource the
entire activity of advertising services to the advertising companies/agencies. Further, these
advertising companies/agencies enter into an agreement with the media owners in India for
implementing the said media plan and procurement of media space for airing or releasing or
printing advertisement.
3.1.3 The advertising agency, in this case, enters into two agreements:
i. With the client located outside India for providing a one stop solution starting
from designing the advertisement to its display in the media as agreed to with
the client. The advertising company raises invoice to its foreign client for the
above advertising services and the payments of the same is received from the
foreign client in foreign exchange.
ii. With the media company to procure media space for display of the
advertisement and to monitor campaign progress based on data shared by the
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media company. The media company bills the advertising agency and the
payment for same is made by the advertising agency to the media company.
3.1.4 Thus, the agreement, in the instant case, is in the nature of two distinct principal-to-
principal supplies and no agreement of supply of services exists between the Media company
and the foreign client. The advertising company is not acting as an agent but has been
contracted by the client to procure and provide certain services. The advertising agency is
providing the services to the client on its own account.
3.1.5 In view of above, it is clarified that in the present scenario, the advertising company is
involved in the main supply of advertising services, including resale of media space, to the
foreign client on principal-to-principal basis as detailed above and does not fulfil the criteria
of “intermediary” under section 2(13) of the IGST Act. Thus, the same cannot be considered
as “intermediary” in such a scenario and accordingly, the place of supply in the instant matter
cannot be linked with the location of supplier of services in terms of section 13(8)(b) of the
IGST Act.
3.2 Issue-2 Whether the representative of foreign client in India or the target
audience of the advertisement in India can be considered as the “recipient” of the
services being supplied by the advertising company under section 2(93) of CGST Act?
3.2.1 As per Section 2(93)(a) of the CGST Act, the “recipient” of the services means the
person who is liable to pay consideration where a consideration is payable for the supply of
goods or services or both.
3.2.2 In the instant scenario, the foreign client is liable to pay the consideration to
advertising company for the supply of advertising and not the consumers or the target
audience that watches the advertisement in India. Further, in this case, even if a
representative of the said foreign client based in India, including a subsidiary or related
person of the said foreign client, is interacting with the advertising company on behalf of the
said foreign client, the said representative based in India cannot be considered as a recipient
of the service, if the agreement is between the foreign client and the advertising company, the
invoice is being issued for the said service by the advertising company to the foreign client
and the payment for the said service is received by the advertising company directly from the
said foreign client. Further, the target audience of the advertisements may be based in India
but such target audience cannot be considered as recipient of the said advertising services
being supplied by the advertising company as per the definition of the recipient under section
2(93) of CGST Act.
3.2.3 Therefore, in view of above, it is clarified that the recipient of the advertising services
provided by the advertising company in such cases is the foreign client and not the Indian
representative of the foreign client based in India or the target audience of the advertisements,
as per section 2(93) of the CGST Act, 2017.
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3.3 Issue-3Whether the advertising services provided by the advertising companies to
foreign clients can be considered as performance-based services as per section 13(3)of
the IGST Act?
3.3.1 The place of supply of performance based services is provided in sub-section (3) of
section 13 of IGST Act. The provisions of clause (a) of the said sub-section pertain to the
services supplied in respect of goods which are required to be made physically available by
the recipient of services to the supplier of services. However, in the instant matter, there does
not appear to be any such involvement of goods which are required to be physically available
with supplier of advertising services. Therefore, the said provisions of clause (a) of the said
sub-section cannot be made applicable for determination of place of supply of advertising
services.
3.3.2 Further, clause of (b) of sub-section (3) of section 13(3)(b) of IGST Act provides that
the place of supply shall be the location where the services are actually performed in case,
where,
a. services are supplied to an individual,
b. represented either as the recipient of services or a person acting on behalf of the
recipient, and
c. which requires the physical presence of the recipient or the person acting on his
behalf, with the supplier for the supply of services
3.2.3 In the present scenario, the supply of advertising services does not require physical
presence of the recipient (foreign client or representative or a person acting on his behalf)
with the advertising company for availing the said advertising services. Thus, the said supply
of advertising services cannot be considered as being covered under section 13(3)(b) of the
IGST Act for being considered as the services actually performed in India in terms of the said
section.
3.3.3 Accordingly, it is clarified that the place of supply of advertising services in such
cases can neither be determined as per the provision of section 13(3)(a) nor as per the
provisions of section 13(3)(b) of IGST Act.
4. Further, it is observed that in the present scenario, the place of supply of the above-
mentioned advertising services does not appear to be covered under any other provisions of
sub-sections (3) to (13) of Section 13 of the IGST Act. Therefore, in view of foregoing
discussion, it appears that the place of supply of the said advertising service being supplied
by the advertising company to the foreign clients can only be determined as per the default
provision, i.e. sub-section (2) of section 13 of IGST Act, i.e. the place of location of the
recipient of the services. Since the recipient of the advertising services in such scenario is the
foreign client, who is located outside India, the place of supply of the said services appears to
be the location of the said foreign client i.e. outside India as per Section 13(2) of IGST Act,
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and the said service can be considered to be export of services, subject to the fulfilment of
conditions mentioned in section 2(6) of IGST Act.
5. However, there may be cases where the advertising company located in India merely
acts as an agent of the foreign client in engaging with the media owner for providing media
space to the foreign client. In such cases, the agreement/ contract for providing the media
space and broadcast of the advertisement is directly between media owner and the foreign
client. The media owner directly invoices the foreign client for providing the media space and
broadcast of the advertisement and the foreign client remits the payment for the said services
directly to the media owner. In such instances, the services of providing media space and
broadcasting the advertisement are directly provided by the media owner to the foreign client.
In such cases, the advertising company is merely facilitating the provision of the said services
of providing media space and broadcasting the advertisement between the foreign client and
the media owner and does not provide the said services on its own account. The advertising
company invoices the foreign client for the facilitation services provided by it.
5.1 Consequently, in such cases, the advertising company is an "intermediary" in
accordance with Section 2(13) of the CGST Act, 2017, as elucidated in Circular No.
159/15/2021-GST dated 20.09.2021, in respect of the said services of facilitating the foreign
client and accordingly, the place of supply in respect of the said services provided by the
advertising company to the foreign client is determinable as per section 13(8)(b)of IGST Act,
i.e. the location of the supplier, i.e. the location of the advertising company.
6. It is requested that suitable trade notices may be issued to publicize the contents of
this Circular.
7. Difficulty, if any, in the implementation of this Circular may be brought to the notice
of the Board. Hindi version will follow.
(Sanjay Mangal)
Principal Commissioner (GST)
