Karnataka AAR: Selling Website Space for Advertisement Attracts 18% GST

The Karnataka bench of Authority for Advance Ruling (AAR) has ruled that selling advertisement space on the internet would be liable to 18% Goods and Services Tax (GST). 

The e-commerce fashion portal Myntra Designs Pvt Ltd (applicant) approached the AAR seeking a ruling on the place of supply and applicability of GST on providing advertisement space on its portal to a foreign entity (Lenzing Singapore Pte Ltd).

The applicant stated that they provide space on its web platform to a foreign entity and receive the consideration in foreign exchange. Thus, the said transaction falls under the export of services and would not be subject to GST.

The AAR stated that it is not in their purview to decide whether the place of supply is outside India or not. Hence, they can not determine the taxability of the said transaction. Thus the AAR moved on to the following question and ruled on the classification and applicable GST rate.

The AAR observed that the applicant is leasing the advertisement space to its customer. Then the advertiser (Lenzing) provides advertisement services to its customer. The service provided by the applicant to Lenzing is that of rendering ‘sale of internet advertising space (except on commission)’. Also, it charges 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 18% GST will attract. This ruling would clarify the scope of sale of space on the internet and set precedence for this type of transaction in the entire industry.

For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@clear.in

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