You don’t have to pay tax for acting in an advert

I am a model who has signed a modeling contract with an FMCG company to advertise their products. I am supposed to model in their commercials as well as in their photo shoots. Recently, someone told me I will have to charge service tax on my modeling fees is it correct?    
— Mehroo Mistry
With effect from July 1, 2010, a new service category called Brand Ambassador service is introduced. The taxable service definition is as under:

“Service provided to any person, by any other person, through a business entity or otherwise, under a contract for promotion or marketing of a brand of goods, service, event or endorsement of name, including a trade name, logo or house mark of a business entity by appearing in advertisement or promotional event or carrying out any promotional activity for such goods, service or event”. Section 65(105)(zzzzq)

Explanation: For the purpose of this sub-clause, ‘brand’ includes symbol, monogram, label, signature or invented words which indicate connection with the said goods, service, or event or business entity. CBEC vide circular letter D.O.F. No. 334/1/2010-TRU, dated February 27, 2010, described the scope of taxable services as under:

Commercial advertisement has taken different shapes and forms. Apart from the advertisements in print and visual media and sponsorship, one of the recent trends is to advertise a brand (ie of goods, services, events, business houses bearing a particular brand name or house name) usually by using a celebrity (such as sportsperson, film stars, etc) to associate him/ her with the brand. The intended impression that is created in the minds of customers or users is that the products and services of that brand have the level of excellence comparable to that of the celebrity. Unlike in case of advertisements using models, a brand ambassador works under a contract of a reasonably long period, where under he is not only required to advertise the goods or service in different media but also to attend promotional, product launching events, make appearances in public activities related to the brand or the brand holder or use such goods or services in public. The contractual amounts are substantial and it may not only involve an individual celebrity but a group of celebrities such as a cricket team or the actors of a successful film.
It is important to note that promotion or marketing of sale of goods produced, provided or belonging to a client and promotion or marketing of services provided by the client are already covered under Business Auxiliary Services (BAS). Such activities would continue to remain classified under BAS. The difference between the services classifiable under BAS and the newly proposed service is that the latter has a wider coverage in the sense that mere promotion of a brand would attract tax under this service even if such promotions cannot be directly linked to promotion of a particular product or service. Many companies/ corporate houses (for example Sahara, ITC or Tatas) are associated with a range of activities including production/ marketing/ sale of goods, provision of services, holding of events, undertaking social activities etc. If the brand name/ house mark etc is promoted by a celebrity without reference to any specific product or services etc, it is difficult to classify it under BAS.

Such activities, like mere establishing goodwill or adding value to a brand would fall under this service. It is further clarified that models acting in advertisement films or photo shoots who have a contract merely for acting and not for promoting or marketing would not be liable to service tax.
Based on the above, if you merely act in the advertisement, then you will not be liable to collect service tax.

The writer is with M Sheth & Co, a chartered accountancy firm in
Mumbai and can be reached at mshethco@yahoo.co.in