In a move that could impact the entire e-commerce space, Karnataka’s Authority for Advance Ruling (AAR) on July 1 came up with a ruling on an application filed by e-commerce player Myntra, wherein Myntra had sought taxation clarity from the authority on what should be the tax rate if it sells space to an advertising agency.
Myntra had approached Karnataka AAR in December 2021, seeking this clarity, it was then in Feb 2022, when AAR heard the matter, and on July 1, the authority observed that “Sale of Advertising Space (except on commission) is taxable to 9 percent CGST and 9 percent SGST.”
Myntra has signed one such ad agreement with a Singapore-based advertiser for leasing advertisement space — Lenzing Singapore Pte Ltd.
The e-commerce platform wanted to know from the Karnataka AAR “what should be the tax treatment when the space is provided to the advertisers for the advertisement.”
The AAR, after hearing the matter, observed that “Myntra has no control over the manner in which the advertiser uses the space, nor is there any privity of contract between Myntra and the ultimate content to which advertisement relates.”
“The content provided by the users of the platform is not reviewed and no warranty or undertaking in relation to the display of any such content or information, including any search results displayed on the platform is provided.”
Such a service is classified as “Other professional, technical and business services” for GST purposes and attracts 18 percent GST.
However, AAR did not rule on the ad agency being located abroad as it doesn’t fall under its jurisdiction.
Source: CNBC TV 18
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