Indian Target Audience and Representatives not Recipients of Advertising Services as Payment Obligations Remain with Foreign Client, Clarifies CBIC [Read Circular]

The Central Board of Indirect Taxes and Customs ( CBIC ) has clarified the status of Indian representatives and target audiences in relation to the receipt of advertising services under Section 2(93) of the CGST Act, 2017. According to the clarification, the Indian representatives and target audiences are not the ‘recipients’ as the payment is made by the foreign client to the advertising company.

This clarification addresses concerns that some field formations are incorrectly treating the place of supply of these services as within India, which has led to the denial of export benefits to Indian advertising companies or agencies serving foreign entities.

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According to Section 2(93)(a) of the CGST Act, the term “recipient” refers to the person who is liable to pay for the supply of goods or services. In the context of advertising services, this means that the party responsible for payment is considered the recipient of those services.

In this case, the foreign client is the one who pays the advertising company for its services. Even if an Indian representative, like a subsidiary or related company, interacts with the advertising company, this representative is not considered the recipient of the services under GST rules.

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The key point is that the contract and payment are directly between the foreign client and the advertising company. The advertising company sends invoices to the foreign client and receives payment directly from them. Therefore, the foreign client is the only official recipient of the services, regardless of any Indian representatives or the target audience in India.

The CBIC’s clarification highlights that while the target audience may be based in India, they do not meet the criteria of a recipient under the CGST Act’s definition. The fundamental aspect here is that the financial transaction and the service contract are exclusively between the foreign client and the advertising company. Therefore, under Section 2(93) of the CGST Act, it is clear that the recipient of the advertising services is the foreign client and not any Indian representatives or the Indian target audience.

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