Display and Banner ads on website are exempted from Service Tax
Internet has now become the most modern method to display advertisement to the targeted persons. The various websites enter into contract with companies for display of their banner ads for the specified period on the internet for a consideration. Display of advertisement on internet will not be taxable.
Clause (g) of 66D reads "Selling of space or time slots for advertisements other than advertisements broadcast by radio or television"
This makes it clear that advertisement banners are taxable only in case of radio and television, all other advertisements are exempted.
However designing of banners is taxable. If you provide the designing service and charge the client, service tax is payable on the value of service provided for designing of advertising banner.
It is to be noted that Advertising agencies are different from advertisement. If an agency is providing advertising services, the service tax is applicable.
To avoid service tax and increase your budget, its recommended that you contact directly the site owners.
The honerable Madras High Court in case of Advertising club vs CBE  121 Taxman 287 has distinguished the services provided by advertising agency and the services provided for display of advertisement.
Companies like google, yahoo etc. display the ads on third party websites. Is adsense in this case a advertising agency?
Do adsense have to pay the service tax on advertisements displayed on third party websites?
Adword is an advertising agency and not adsense. Website owners need not to pay service tax to government as they are selling space on website.
Adword might be charging service tax based on the platform they use. Google search ads are not covered under service tax, as they are direct selling of space on site.