The Central Board of Excise and Customs has proposed a 10 per cent service tax on advertisement space in the print and visual media and has decided to bring money changers in the ambit of the tax.

"The amount paid by advertising agencies to the media for obtaining space for display or exhibition, being in the nature of input service used in providing the taxable service, is liable to be included in the value of the taxable service," the CBEC said in a draft circular issued on Monday.

At present, only the 15 per cent commission given to advertising agencies by the media is liable to service tax. However, if the present draft becomes a reality, all payments made to advertising agencies by their clients will attract service tax.

"The government is trying to overturn the existing position and there will be a heavy burden on the advertising industry. The Central Excise, Customs and Service Tax Tribunal, in a number of cases, has held that payments made for space booking are not taxable. In my view, this draft circular may not be in consonance with the existing provisions of the law unless the provisions are changed," said JK Mittal, a service tax expert.

The CBEC, however, said space or slot bookings by ad agencies on behalf of their clients were an input service and formed an integral part of taxable services provided under the law.

It pointed out that in computing the value of the taxable service provided by an advertising agency to a client, "the amount paid by the agency to the print or the electronic media for display or exhibition of advertisement was included in the consideration paid by the client".

The service provided by an advertising agency to its client is a composite and single service and use of advertisement space as an input service cannot be treated independently as a service separately provided on the client's own account. Accordingly, service tax is to be levied on the entire payment made by the client to the advertising agency, inclusive of the amount paid by the advertising agency to the media," it said.

On money changers, the CBEC said, "They cannot be left out of the purview of service tax on the plea that they are merely selling and purchasing foreign currencies and not dealing or brokering in foreign exchange. Under the Sale of Goods Act, goods mean every kind of moveable property but excludes money. Therefore, transactions in foreign exchange do not fall under the scope of sale."