Is a Web site selling advertisement space to clients liable to service tax?
The issue has been raised by the world's largest search engine, Google, which had filed an application for an advance ruling in this regard.
Google Online India Private Ltd, a wholly owned subsidiary of Google International LLC, USA, had sought an advance ruling on whether it would be liable to service tax.
"We are not in a position to commence our operations in India because we've filed this application with the Authority for Advance Rulings," the company said last month.
Foreign companies operating in India through a wholly-owned subsidiary or through a joint venture, non-residents setting up a venture here or residents in a collaboration with NRIs, are permitted to apply for advance rulings on matters pertaining to classification of service as a taxable service, valuation of taxable services, applicability of notifications or admissibility of credit of a service tax.
Advance ruling procedure is similar to that of a civil court. However, there is no provision for an appeal against the ruling unless there is a change in law or facts on the basis of which the ruling was announced.
Google International LLC in the US sells advertisement space, wherein it allows its advertisers or clients to display the name of their Web sites on its site.
The links to the advertiser's Web sites are displayed as a result of the search query of the users. Google USA charges the advertisers with respect to the sale of space slots on the Google search engine (Web site).
GIPL is planning to adopt a similar model in India. GIPL will engage in direct selling, syndication partnerships and reseller deals with agencies. It will also engage in marketing and promotional activities to sell space slots on the Google sites.
In view of the application being filed, the Commissionerate of Service tax has been asked to examine if there had been such cases earlier. The authority is expected to give its ruling this month.
