18% GST eligible on sale of internet advertising space: AAR

18% GST eligible on sale of internet advertising space: AAR

The Karnataka Authority of Advance Ruling (AAR) has recently ruled that the sale of internet advertising space is eligible at 18% GST.

The applicants are Myntra Designs Private Limited, a major Indian fashion e-commerce company, which entered into an agreement with Lenzing Singapore Pte Limited in relation to advertisement material in the form of impressions provided to the applicant by Lenzing for placement on the e-commerce portal website and mobile application.

The suppliers of fashion and lifestyle products sell their products through the applicant's portal, list their products and sell them to the customers who place their order using the applicant's portal. Once an order is placed, money is collected by the applicant through the portal in its capacity as an e-commerce portal operator and settles the amount payable with the supplier of the order within a specified period.

The Applicant, therefore, has sought an advance ruling in respect of the correct classification of the services provided and the rate of the tax on the transaction of the applicant providing space on its web portal for advertisements provided by a foreign entity, i.e. Lenzing Singapore Pte Limited.

It was held that the services provided by the applicant to M/s Lenzing are those of rendering "Sale of internet advertising space (except on commission)" and the applicant is charging a fixed rate and not a commission for providing such space. Hence, the same is classified under six-digit SAC 998365 under the heading 9983, which reads "Other professional, technical, and business services". Therefore, 18% GST is eligible for the advertising space.