Google India was earlier ordered to pay service tax for selling Google Adwords. Now even Adsense Publishers in India will have to pay Service Tax to the government.

The Indian Finance Bill of 2006 clearly states that sale of space for advertisement in places other than the print media will attract a 12% service tax. This includes providing space for display, advertising, showcasing of any product or service on Internet.

Details of THE FINANCE BILL, 2006 are mentioned below:

For the purposes of this sub-clause, "sale of space or time for advertisement" includes,-

(i) providing space or time, as the case may be, for display, advertising, showcasing of any product or service in video programmes, television programmes or motion pictures or music albums, or on billboards, public places, buildings, conveyances, cell phones, automated teller machines, internet;

Watch Union Budget 2006-07 Webcast

Download Central Excise Service Tax Notifications [pdf]