Advertising sector demands GST reforms to cut friction and unlock liquidity

New Delhi: Prime Minister Narendra Modi’s recent announcement of new reforms under the Goods and Services Tax (GST) regime has sparked anticipation across industries, including advertising and marketing. The advertising sector currently falls under the 18% slab. 

While GST, introduced in 2017, was designed to simplify India’s tax structure, the advertising sector has continued to grapple with multiple interpretations, delayed refunds, and complex compliance requirements. These issues have often tied up working capital and created friction between agencies, clients, and regulators.

Industry leaders now hope that the upcoming reforms will not only streamline processes but also level the playing field between digital and traditional advertising, providing much-needed clarity and predictability in taxation.

Seeking simplification

According to Prakhar Srivastava, Vice President - Financial Planning and Corporate Strategy, White Rivers Media, the biggest expectation is “simplification.” 

“Advertising services already fall under an 18% slab, yet reforms can make compliance smoother. Clearer rules on what qualifies as ‘export of services’ for international mandates, faster refunds, and reduced paperwork would help reduce disputes and improve liquidity for both agencies and advertisers,” Srivastava said. 

Shradha Agarwal, Co-founder and Global CEO of Grapes Worldwide, chimed in, saying, “The advertising and marketing industry is hopeful that the upcoming GST reforms will bring greater clarity, consistency, and simplicity. At present, multiple interpretations and cumbersome compliance procedures create avoidable friction for both agencies and clients. The expectation is that the reforms will streamline taxation, reduce ambiguity, and ultimately make the sector more efficient.” 

Digital vs traditional advertising spends

One of the key questions is how the reforms may shift spending between digital and traditional media. Agarwal pointed out that digital advertising often suffers from higher compliance costs and cascading tax effects, which puts it at a disadvantage. 

A level playing field, she said, would allow brands to allocate budgets based on consumer strategy instead of tax pressures. 

Srivastava added that digital advertising is likely to benefit most from the changes, particularly with the withdrawal of the equalisation levy on cross-border ads and its integration into GST. “Campaign costs on global platforms are expected to decrease. This strengthens the case for digital, already outpacing traditional channels. Traditional media may not see direct cost changes, but simplified compliance and smoother credit flows can free up budgets, potentially supporting integrated campaigns,” he noted. 

Separately, the outdoor advertising industry has made a formal representation to the government seeking relief. 

In a letter dated August 11, 2025 to the Finance Minister, Pawan Bansal, Chairman of the Indian Outdoor Advertising Association (IOAA), requested a reduction of GST on outdoor advertising from 18% to 5% and exemption from GST for PPP-linked outdoor advertising projects that build civic amenities such as street furniture, bus shelters, public toilets, benches and signages. 

The letter argues that the current rate disproportionately burdens MSMEs, discourages private investment in public-benefit projects, and urges policy recognition of the sector’s public-service contribution, while welcoming the Prime Minister’s call for GST rationalisation.

Sandeep Goyal, Managing Director, Rediffusion, observed that the impact will ultimately vary by sector. 

“GST rate rationalisation is expected to benefit a wide range of sectors, including automobiles (particularly entry-level cars and two-wheelers), consumer durables, processed foods, and daily-use items such as footwear and affordable apparel. Positive impacts are also anticipated in textiles, fertilisers, renewable energy, handicrafts, agriculture, health, and insurance.”

He added, “This, in turn, will create a more conducive environment for advertising and promotion. The choice between traditional and digital platforms will ultimately depend on the specific category and its consumer base.” 

Reforms that will make the most difference

According to Agarwal, “Eliminating tax ambiguities around bundled services, creative consultancy, and digital tools, while ensuring smoother credit utilisation, would be a game-changer. It would free up agencies’ working capital, enabling them to invest more in their people, new ideas, and technology.” 

Srivastava identified three key areas where reforms could make a tangible difference: input tax credit and refunds, cross-border campaigns, and influencer marketing. 

“Delays and disputes tie up working capital. Faster, more predictable processing would ease pressure for agencies and brands. Standardising documentation for international digital spends would reduce friction, especially for SMEs. And clear rules on non-cash consideration in influencer marketing would bring clarity to a fast-growing segment,” he explained. 

The long-term effect

Looking ahead, leaders agree that a simpler and more predictable GST structure will strengthen India’s advertising and marketing ecosystem. Agarwal believes such reforms will make the industry globally aligned. 

“This would boost growth and encourage both domestic and international brands to invest more freely in India. Ultimately, it’s about creating an environment where creativity can flourish without being held back by complicated compliance rules,” she said

Srivastava said the long-term impact will be greater efficiency and competitiveness. “A more predictable GST regime will allow the sector to focus less on compliance and more on innovation. If tax reforms make liquidity easier and compliance simpler, brands can reinvest in content, creativity, and technology,” he said.

Goyal added that by benefiting consumption-driven sectors through rate rationalisation, the reforms will indirectly expand the scope for advertising across both traditional and digital channels.