GST For Ad Agency: Rates, Penalties, Exemption and More

GST stands for Goods and Service Tax. It is a unified tax system that has replaced multiple indirect taxed in India. Service-based businesses like ad agencies must register under GST once their turnover crosses the limit. Like any other service provider advertising agencies that provides services like digital ads, print campaigns, influencer marketing and more also need to pay GST. In this article, you will learn about GST for advertising agencies, documentation and more. 

What is an Ad Agency under GST Law?

Under GST law, an ad agency is a service provider that creates, manages, and delivers advertisements for clients. These agencies act as intermediaries between businesses and the public. They help brands promote their products or services using different media.

Other than that, Section 65(2) states that an advertisement refers to any message or announcement delivered through notices, circulars, labels, wrappers, documents, hoardings, or any visual or audio format using light, sound, smoke, or gas. On the other hand, Section 65(3) defines an advertising agency as any individual or entity that offers services related to the creation, planning, presentation, or promotion of advertisements. This also includes professionals known as advertising consultants.

Rates of GST for Advertising Agencies:

Under India's Goods and Services Tax (GST) framework, advertising agencies are taxed at different rates according to the medium and nature of the service:

Exemption of GST for Ad Agencies

Advertising agencies are usually subject to GST, but there are a few special cases where services can be exempted. Below are the key scenarios where an ad agency may not have to pay GST.

1. Advertisement in Print Media:

If an ad agency sells ad space in print media, GST may be exempt. This applies only to newspapers registered with the Registrar of Newspapers for India (RNI). The agency must act as a space seller. It should not provide any creative or design service. For example, if the agency books a newspaper column for a client and does not design the ad, GST may not apply or is charged at 5%.

2. Pure Services to government bodies:

Under GST Notification No. 12/2017 – Central Tax (Rate), advertising agencies are not required to pay GST when they provide pure services. Pure services refer to services that do not involve the exchange of goods.

This rule applies to services given to the Central Government, State Government, Union Territories, local authorities, or other government bodies. The service must help in public welfare. This includes education, healthcare, sanitation, and public safety. For example, if an agency creates a health awareness ad for a state government, it does not pay GST.

3. Service provided to SEZ units or Developers

When an ad agencies provide services to clients in a Special Economic Zone (SEZ), they are categorized under zero-rated GST. This means the agency does not charge GST. However, the agency can claim input tax credit. The service must be for the SEZ's approved work. The agency needs to keep proper documents such as a Letter of Undertaking (LUT). For example, if an agency provides digital marketing services to an IT company in an SEZ, the agency will not charge any GST for their services.

4. Government Broadcast Advertisement

The government broadcasts some advertisements for public awareness. These ads are fully exempt from GST. They share messages about health, safety, and national campaigns. For example, the Ministry of Health airs a COVID-19 safety ad.

Who needs GST Registration?

Every advertising agency must register under GST if its annual turnover crosses the prescribed limit. This rule applies to all types of ad service providers—whether they are freelancers, small firms, or full-service ad agencies.

Even if some services fall under GST exemption for advertising services, registration becomes mandatory once the income goes beyond the limit. Registration is also required for agencies working across states, regardless of turnover.

Registration Threshold of GST for Ad Agencies

If an agency crosses the turnover limit, it must apply for GST registration on the official GST portal. Early registration also allows input tax credit benefits and builds trust with corporate and government clients. Listed below is the GST threshold for advertising agencies

Compulsory Registration Irrespective of Turnover

Certain scenarios necessitate GST registration regardless of turnover:

• Inter-State Supply: Agencies providing services across state borders.
• E-Commerce Participation: Agencies supplying services through e-commerce platforms.
• Reverse Charge Mechanism: Situations where the recipient is liable to pay GST.
• Input Service Distributors (ISD): Entities distributing input tax credit.

Engaging in any of these activities requires GST registration, even if the turnover is below the standard threshold

SAC for Advertising Agency:

SAC stands for Services Accounting Code. It is a system of classification used under GST (Goods and Services Tax) in India to categorize different services. HSN codes are used for goods, SAC codes are used for services. Below is a list of the SACs for advertising services:

How to Register for GST for Ad Agency

Goods and Services Tax (GST) is a value-added tax applied to most goods and services used within the country. Advertising agency owners need to understand the GST registration process. Since it will help them stay legally compliant and avoid fines. Below is a step-by-step guide to help advertising agencies register for GST.

Step 1: Verify the eligibility

An advertising agency must register under GST when it meets certain conditions under the law. The most common case is when annual turnover crosses ?20 lakh, or ?10 for special category states. GST registration is also mandatory when the agency provides services across state borders, despite the fact that they are below the threshold limit. Other than that, GST registration is also necessary for the agencies that offer services through online or digital platforms. These rules come under the Central Goods and Services Tax (CGST) Act, 2017.

Step 2: GST Registration

Advertising Agencies need to register for GST on the official GST portal. The process is quite simple and can be done from any device with internet access. To begin, the agency must go to the portal and click on the “New Registration” option. A form will appear where basic details need to be filled in. These include the Permanent Account Number (PAN) of the business, a valid email address, and an active mobile number.

Once these details are submitted, the system sends an OTP (One-Time Password) to both the email and the mobile number. The applicant must enter these OTPs to verify the contact details and move to the next step in the registration process.

Step 3: Fill Out the Application Form

Once the mobile number and email are verified, the next step is to complete the GST REG-01 form on the portal. This form collects important details about the advertising agency. The agency must enter basic business information, such as the legal name, trade name (if any), and type of business. After that, the ad agency needs to the business address and select the type of services it offers—like advertising, marketing, or media buying.

Next, the agency should enter its bank details, including the account number, IFSC code, and branch name. After filling in all the required information, the agency must upload the necessary documents listed earlier. Once everything is complete and accurate, the form can be submitted online for review.

Step 4: Providing the Required Documents

To register for GST, an advertising agency must collect and upload certain documents. Listed below are the documents that the applicant needs to provide to apply for GST registration:

• PAN card of the business or the owner
• Business registration proof, which includes a certificate of incorporation or partnership deed
• Address proof of the business location, such as rent agreement, electricity bill, etc.
• Bank account details such as cancelled cheque or a copy of the passbook,
• Passport-size photograph of the authorized person
• Authorization letter or board resolution (if someone else applies on behalf of the business)

Step 5: Application Verification

After the agency submits the application, a GST officer will review all the details. The officer will thoroughly check the form and verify the uploaded documents. If everything looks correct, the officer approves the registration immediately.

However, if something is missing or unclear, the officer may ask for more information. In that case, the agency must reply quickly and provide the correct details. Once the officer is satisfied, the registration gets approved, and the next step begins.

Step 6: Obtain GST certificate

After the application is approved, the GST portal issues a GST registration certificate. This certificate includes a unique GSTIN—Goods and Services Tax Identification Number that is assigned to the agency.

The ad agency owner can easily download the certificate from the GST portal. It is necessary to keep a copy of this certificate and display it at the business place, as required under GST rules.

Step 7: File your GST return

Once the advertising agency completes registration, it must start filing GST returns as per the rules. The filing can be monthly or quarterly, according to the agency’s annual turnover and the chosen return type. The agency must also maintain proper records of all income earned and expenses made during business operations. This helps to file accurate returns and avoid any mismatches.

It is important to pay the due GST on time. If an agency fails to do so, it may lead to penalties, late fees, or interest charges. When an agency files its GST return on time, it helps the agency stay compliant and builds a clean tax record.

Penalties for Non-Compliance with GST for Ad Agencies:

If an advertisement agency fails to follow the GST rules, it is subjected to penalties, fines and legal trouble. Listed below are the fines that the government has imposed to ensure that all the ad agencies follow the law and regulations:

To sum up, it is important for agency owners to know about GST for advertising agency, even if the agency is into digital marketing, print ads, or media buying. Proper registration, return filing, and compliance help avoid heavy penalties and build client trust.

Though the process might seem complex, agencies can take assistance from reliable and trusted platforms. Among other service providers, Online Legal India is one of the most trusted and reliable platforms to assist the agencies with GST registration, timely return filing. Their expert team will ensure compliance with the rules and regulations.