India Budget 2014: Service Tax to be Levied on Online, Mobile Ads

India Budget 2014: Service tax to be levied on online, mobile ads

The digital advertising industry was not necessarily expecting a special bounty from the finance minister in this budget, but they are now grappling with is the inclusion of internet and mobile advertising in the service tax dragnet Finance Minister Arun Jaitley proposed to levy a service tax on online and mobile advertisements in an attempt to broaden the tax base and shore up his tax revenues while he presenting the nation’s budget for 2014. This, for an industry which is still a fledging one, and is merely about 2900 crore, according to IAMAI (Internet and Mobile Association of India) estimates.

The Founder and CEO of Web chutney, a digital advertising agency said that people haven’t consulted with our auditors about details of the implication, it’s clear either the client or the publisher will have to take the hit. Chances are a lot of clients assessing may cut back spends to that extent and take actions accordingly.Also this means we need to ensure as much as possible billing of past and current activity is quickly finished to avoid disputes/claims later on by service tax authorities.

Till now internet and mobile advertising included in the negative list that specified the service on which no tax was payable. Finance Minister Arun Jaitley said that it is necessary to prune the negative list and exemptions to the extent possible. Accordingly the negative list has been reviewed and service tax leviable currently, on sale of space or time for advertisements in broadcast media, is being extended to cover such sales on other segments like online and mobile advertising. However the sale of space for advertisements in the print media ( almost 10 times bigger than digital advertising) remains excluded from service tax.

CEO of Publicise Beehive, B.Sanjit Shastri, on the contrary believes that the service tax (12.36%) now imposed on the internet and mobile advertising is not more than 10% of the total advertising budget for many clients, so in effect, this will at best add another 1% to their total advertising cost, which is negligible. For an industry which is growing at the rate of 25 to 30% annually, this is just a pebble on the digital highway.

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