Indian Service Tax
Market Research Agency
Effective Date: 16/10/1998.
Authority: Notification No. 53/98-ST, dt. 7/10/1998 (for full text of Notification see under'Architect').
Rate of Service Tax: 8% from 14-5-2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.
Definition: "market research agency"means any commercial concern engaged in conducting market research in any manner, in relation to any product, service or utility, including all types of customised and syndicated research services; [Section 65(69)]
Taxable service: Market Research Agency providing service to a client in relation to market research of any product, service or utility, in any manner. Value of taxable service: The gross amount charged by such agency from the client for services rendered in connection with market research of any product, service or utility, in any manner.
Exemptions
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Services rendered abroad.
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Reimbursable expenses on actual basis.
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Academic & Professional Research.
Person liable to pay: Market Research Agency.
Head of Account
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Questions & Answers
Q. 1 What is a Market Research Agency?
Ans. "Market Research Agency" is a commercial concern engaged in conducting market research in any manner, in relation to any product, service or utility, including all types of customised and syndicated research services.
Market research includes research based services in respect of consumer markets, industrial marketing, business to business marketing, social and rural marketing, etc. and is based on the requirements of the client. Such research services may be carried out by various techniques and may take the form of brand and advertising research. Such market research services include studies such as, strategic research & brand positioning development, new product development research, creating development research, brand name, logo, pack label research, corporate image, diagnostic market research, customer research, etc. Therefore, the market research services are of a very diverse nature and of a very wide variety.
Q. 2 What is the taxable service in case of services provided by a Market Research Agency?
Ans. Taxable service means any service provided to a client, by a market research agency in relation to market research of any product, service or utility, in any manner.
Q.3 What is the value of the taxable service in case of services provided by Market Research Agency?
Ans. Value of the taxable service in relation to the service provided by a market research agency to a client, is the gross amount charged by such agency from the client for services rendered in connection with market research of any product, service or utility in any manner.
Q. 4 Whether the Service tax is payable by the market research agencies on services rendered to the advertising agencies who has subcontracted the work to them?
Ans. Yes, in the case where a market research agency is providing the service to the advertising agencies, who have commissioned its services on behalf of the client, the market research agency would be required to pay service tax on services rendered by it to an advertising agency. The advertising agency would also liable to pay service tax on the amount billed to its client, but for advertising services.
Q. 5 Is service tax payable on the reimbursable/out-of-pocket expenses charged to the client on actual basis?
Ans. No. The charges billed to the client by Market Research Agency on account of out of pocket expenses which are reimbursable on actual basis, such as, travelling, boarding and lodging expenses are not subject to service tax. In this respect, the service tax assessee may be required by the jurisdictional officers to provide documentary evidence substantiating his claim for abatement from the gross amount received from the client for services rendered.
Main text of Departmental Circular/TN
[TN No. 116/98-ST, dated 15/10/1998 of Hyderabad Commissionerate]
6.1 Under Section 65(25)* a "market research agency" means any commercial concern engaged in conducting market research in any manner, in relation to any product, service or utility, including all types of customised and syndicated research services. Market research inter alia, includes research based services in respect of consumer markets, industrial marketing, business to business marketing, social and rural marketing etc. and is based on the requirements of the client. Such research services may be carried out by various techniques and may take the form of brand and advertising research. Such market research services include studies such as, strategic research & brand positioning development, new product development research, creative development research, brand name, logo, pack label research, corporate image, diagnostic market research, customer research etc. Thus, it is apparent that the market research services are of a very diverse nature and of a very wide variety.
6.2 A question has been raised as to whether service tax is payable by a market research agency in case an advertising agency commissions a market research for or on behalf of a client of the advertising agency, as it would result in double or multiple taxation (as the advertising agency is also liable for paying service tax on services rendered by him to his client). It is clarified that in the instant case a market research agency would be required to pay service tax on services rendered by it to an advertising agency, and the advertising agency is also liable to pay service tax on the amount billed to its client for advertising services. As stated earlier in para 5.6, service tax is not required to be paid by a sub-contractor only in cases where service tax has been paid by the principal on services rendered by him to his client and provided further that the subcontracting in question is in respect of the same service category.
6.3 An issue has been raised whether service tax is payable in respect of services rendered to foreign clients in India, and in respect of such services rendered abroad. It is clarified that service tax is payable on all taxable services rendered in India, whether to an Indian or foreign client. However, services rendered abroad shall not attract service tax levy as service tax extends only to services provided within India.
6.4 Another concern that has been raised is whether service tax is payable on the reimbursable/out-of-pocket expenses charged to the client on actual basis. As regards charges billed to the client on account of out of pocket expenses which are reimbursable on actual basis, such as, travelling, boarding and lodging expenses is concerned, the same are not subject to service tax. In this respect, the service tax assessee may be required by the jurisdictional Commissioner of Central Excise to provide documentary evidence substantiating his claim for abatement from the gross amount received from the client for services rendered. Similar dispensation in respect of reimbursable/out-of-pocket expenses charged to the client on actual basis is also available in respect of other services.
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