ADJUSTMENT OF INPUT TAX PAID ON ADVERTISEMENT SERVICES

ADJUSTMENT OF INPUT TAX PAID ON ADVERTISEMENT SERVICES <!--[if gte mso 10]> ADJUSTMENT OF INPUT TAX PAID ON ADVERTISEMENT SERVICES By Akhtar Javed, Advocate, Lahore To promote their business, various manufacturers hire the services of advertising agencies which charge sales tax on the supply of services of advertisement in pursuance of section 3(2) read with serial No. 2 of the Schedule to the Punjab Sales Tax Ordinance, 2000. These advertising services are utilized either exclusively for the purpose of taxable supplies made by the registered persons or for taxable as well as exempt supplies. 2. C.B.R. has consistently held the view in its various clarificatory letters that a registered person is entitled to make adjustment of input tax paid on services against output tax payable on taxable supplies of goods. C.B.R. vide C. No. 4(80) STB. Retail (Pt) dated 1-7-2000 has clearly stated that "all the provisions of Sales Tax Act, 1990 are therefore, applicable on these services without any exception." 3. Similarly C.B.R. in its letter 1/16-STR/2000 dated 15th January 2001 has clarified that "sales tax paid on taxable services is adjustable against the output tax of a registered person, because the same is to be charged and collected in the same mode and manner as provided by the Sales Tax Act, 1990." 4. In spite of C.B.R.'s categorical clarifications, field staff of sales tax had been raising observations regarding adjustment/refund of input tax paid on advertisement services. In a recent Letter C. No. 1(17)STR/2000 dated 11-11-2002, C.B.R. has clarified that "Adjustment of sales tax on services of advertisement as input tax can be claimed under clause (a) of subsection (I) of section 8 of the Sales Tax Act, 1990 provided it is established that sales tax invoice has been issued by a sales tax Registered Person (Service Provider) directly in the name of sales tax registered person/buyer who procured services only for exclusive use in making supplies of taxable goods or rendering of service. However, while claiming input tax adjustment the provisions of Apportionment Rules issued vide Notification No. S.R.O. 698(I)/96 dated 22-8-1996 may be kept in view and no input tax adjustment for items mentioned in S.R.O. 578 (I)/98 dated 12-6-1998 would be admissible."