Help with tax on advertising services

[alisidd]

i run a freelance graphic designing setup.Designing of packages,cover designs,brochures,skillets,hoardings,banners and cartons are my major provisions,my customers are well known registered companies who have been deducting income tax @ 6% on my bills, recently I've been informed that from now on my bills will be entitled to 16% WHT which will be in addition to income tax already been deducted.I am not registered for sales tax and my basic concern is, giving the nature of services i render am i entitled for such tax and should i register for sales tax???
I need serious help with this...please reply ASAP

[awaisaftab]

Dear Ali,

Your post shows that you are not running a full fledged advertising agency. An advertising agence is required to be accrediated with All Pakisstan Newspaper society (APNS) (for publication of ads) in newspapers, Pakistan Brodacasters Association (For broadcasting of ads on TV Channerl) and Prees Information Department (For serving Govt organizations). I think you are running a graphic house which produces different items for publicity of different businesses. Your business is some howe production business and does not fall within the meaning of advertisement services. The product produced by your business are supplies rather then Advertising Services. So please inform your clients that deduct withholding tax at the rate of 3.5% rather than 6%. Because your are provider of supplies (Goods) not provider of services.

It is common practice of advertising agencies that they also do such works and in advertising agencies we use a term Other Media for these activities to differenciate these activities from Electronic Media and Print Media.

Sales tax is not applicable on services provided by your business.

I want to give you an example.

If you want to sale a particular layout to an customer each you will make bill in the following manner


Designing and graphics charges- 10,000/-


Total Amount 10,000/-


Now your client is liable to pay 11600 and he will deduct tax @3.5%,(unless you provide advertising services through electronic or print media)

Client will pay you

Total Bill 10,000

Less Tax @% ============= <u> -600</u>

============================ 9,400



Regards,

Awais Aftab

[alisidd]

Mr.Awais Aftab thanks for you're help regarding my concern, i still don't understand how am i providing supplies rather than services and from you're illustrated example it looks like you're under the impression that i am printing banners which is not the case, i merely design the layouts for my clients, and deliver the final design either on CD ROM or via e-mail.

Please clarify the criteria for categorizing a product as a supply or as a service.

[LapTop]

(23) “fee for technical services” means any consideration, whether periodical or lump sum, for the rendering of any managerial, technical or consultancy services including the services of technical
or other personnel, but does not include –
(a) consideration for services rendered in relation to a construction, assembly or like project undertaken by the recipient; or
(b) consideration which would be income of the recipient chargeable under the head “Salary”;

In my opinion you r providing professional services, and according to definition above mention.
your client deducting 6% WHT correct. But you are not providing Advertising services on cable TV or media channel, So your service is not sales tax service.
As well as you are not providing services of print media or outdoor advertising, so you can not charge FED 16% VAT mode as well as your client.

[awaisaftab]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by alisidd</i>
<br />Mr.Awais Aftab thanks for you're help regarding my concern, i still don't understand how am i providing supplies rather than services and from you're illustrated example it looks like you're under the impression that i am printing banners which is not the case, i merely design the layouts for my clients, and deliver the final design either on CD ROM or via e-mail.

Please clarify the criteria for categorizing a product as a supply or as a service.

<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
If you design the layouts clients and deliver the final design either on CD ROM or via e-mail than it will considered service and withholding tax shall be deducted @6% I have chaged my illustration please see it above.


Yes, I couldnot

[alisidd]

Guys thanks a loads for your help...your replies have really helped me a lot..i will discuss it with my clients and let you know if i have any more quarries.