Media companies hope for implementation of GST in Union Budget
Moneylife Digital Team 25 February 2011

A uniform, simplified taxation system will benefit TV and newspaper businesses that have been growing fast through the launch of regional channels and editions

When Union finance minister Pranab Mukherjee presents the Budget on Monday, media companies will be hoping that he will give them a uniform and simplified tax system that will help to ensure growth and reduce their losses. The implementation of GST tops their wish-list.

After the annus horibilus (Latin for a 'horrible year') 2009, the media sector made a turnaround in 2010, in terms of advertising revenues and growth. Media analysts and company representatives say that in order for this performance to continue, it is imperative that the government reduces the tax burden on the sector and implements the Goods and Service Tax (GST).

"Entertainment tax in India is among the highest in the world-in some cases as high as 25%-and it differs from state to state," said an analyst from Pinc Money. "If a seamless, uniform structure is put in place, it benefits the sector tremendously." This view is supported by nearly all broadcasters and media houses. Jawahar Goel, managing director, DishTV India, remarked in a television interview recently that the media sector's main expectation from the Budget is rationalisation of taxes.

No wonder they are hoping that the GST is implemented, for the sake of uniform and single-point taxation across categories all over India. Last year, many new channels were launched, and this trend has continued this year. So, lowering of taxes and reforming distribution norms is something they are very eager about.

"GST becomes especially important now, when most of the brands are looking for regional expansion," the analyst said. Last year, almost all the newspapers diversified into new local editions and television companies launched local language channels. This is why a simplified pan-Indian model of taxation will be a huge benefit.

Another important issue is raising the FDI cap in all segments. Joy Chakraborty, chief revenue officer of Zee Entertainment Enterprises, said in a statement, "Raising the FDI limit can be a big boost for international media distributors to enter the country with controlling stakes. They could play a catalytic role in the corporatisation of this industry, which would result in greater transparency and increased subscription revenues."

With the roll-out of Phase-III radio reforms and the conditional access system (CAS), radio channels too, are looking forward to GST implementation and raising the FDI cap. Recently, Prashant Pandey, chief executive officer, Entertainment Network India, said that the FDI cap for radio must be raised beyond the 26% limit. However, the music industry wants the government to revert to the old royalty fee structure for radio broadcasts.

The new rules by the Copyright Board say that radio stations have to pay 2% of their net advertising revenues as royalty to the music industry. Earlier, stations had to pay a fixed amount per hour as royalty. Savio D'Souza, secretary-general of the Indian Music Industry, said, "Already, the industry is crippled by piracy. Reduced royalty fees will lead to our death."

The cable and DTH industry, which has to go for complete digitisation as per TRAI instructions, is particularly eager about the abolishing of customs duties on imported set-top boxes and the reduction of license fees. Therefore, they will be looking at the Direct Tax Code (DTC) announcements closely.

Dual taxation on copyright, that is both service tax and VAT, is another issue. MK Anand, chief executive officer, UTV Interactive, said, "Dual taxation (that is, service tax and VAT) on transfer of copyright in relation to cinematographic films is affecting the industry at large, and lack of clarity from the government on the applicability of service tax and VAT on the same transaction is fuelling speculation." He said that the industry is eagerly awaiting implementation of GST, which will ensure clarity and end double taxation.

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