Sale of online advertising space to attract 18% GST: AAR

Advertising space sold on the internet is subject to an 18% Goods and Services Tax (GST), the Karnataka bench of the Advance Rulings Authority (AAR) has said.

E-commerce portal Myntra Designs had approached the AAR for a ruling on whether the supply of advertising space on its portal to foreign entity Lenzing Singapore was subject to GST.

The AAR stated that Myntra only leases the advertising space to its client and that the advertiser (Lenzing) provides advertising services to its client.

The service provided by Myntra to Lenzing is that of the “sale of advertising space on the Internet (except on commission)”, and it charges a fixed rate and not a commission for the provision of this space.

Therefore, these will be categorized as “other professional, technical and business services” under the GST Act, and are subject to 18% GST, he said.

“While the decision clarifies that the GST is applicable to the sale of advertising space on e-commerce platforms, it is relevant to note that the manner of charging for these services, i.e. through fixed charges , was considered the most relevant factor for classification and taxation purposes,” said MS Mani, Partner, Deloitte India.

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Marilyn J. Hernandez