Online and mobile publishers and advertising networks will be subject to service tax once again, after two years of no service tax being applicable. Online and mobile advertising had been included in the “negative list” for service tax in April 2012, and have now been removed. This can negatively impact advertising budgets, since a part of the outlay will be allocated to taxes. Service tax in India is at 12.36%

The specific paragraph from the Budget speech:

“To broaden the tax base in Service Tax, 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. Sale of space for advertisements in print media however would remain excluded from service tax.”

From our 2012 story, by Chartered Account Pallav Pradyumn Narag of Arkay & Arkay,

 “In layman terms “Sale of space or time for advertisement” includes,-

  1. Providing space or time, as the case may be, for display, advertising, showcasing of any product or service in video programs, television programs or motion pictures or automated teller machines, mobile phones, or ,importantly, over the internet;
  2. Selling of time slots on radio or television by a person, other than a broadcasting agency or organization;
  3.  Aerial advertising”

We’ll update with more information when we have more.

Disclosure: this ruling impacts MediaNama, which is an online publisher and depends on advertising for revenues