How to calculate service tax if discount is allowed in bill (tax on gross amt or on net amt)?

We get discount (say 10%) on advertisement bills. Bill is raised by ad agency as under: Gross amount Rs.100/- ;Less: Discount Rs.10/-; Net amount Rs.90/- ; Add: Service Tax @ 10.3% Rs.10/-. Ad agency claims service tax on gross amount. Pl clarify if service tax is payable on gross amt or on net amount.