Advertisement space sold on the internet is liable to 18% goods and services tax (GST), the Karnataka bench of the Authority for Advance Ruling (AAR) has said.
E-commerce portal Myntra Designs had approached the AAR seeking a ruling on whether providing advertisement space on its portal to foreign entity Lenzing Singapore was liable to GST.
The AAR said Myntra is only leasing the advertisement space to its customer and the advertiser (Lenzing) is providing advertisement services to its customer.
The service provided by Myntra to Lenzing is that of rendering ‘sale of internet advertising space (except on commission)’, and it is charging a fixed rate and not a commission for providing such space.
Hence, the same will be classified under ‘other professional, technical and business services’ under GST law, and is liable to GST at 18%, it said.
“While the ruling specifies that GST is applicable on sale of advertisement space on e-commerce platforms, it is pertinent to note that the manner of charging for such services, i.e. by way of fixed fees, has been considered as the most relevant factor for classification and taxability purposes,” said MS Mani, partner, Deloitte India.