Budget 2012: Reactions from Stakeholders

17 Mar,2012

Rakesh Jariwala, Partner & Tax Expert, M&E, Ernst & Young


“The key takeaway from the Union Budget 2012 for the Media and Entertainment Sector (‘M&E’) is the exemption to be provided from service tax on Copyrights in Cinematographic films with the introduction of the negative list concept under the service tax legislation.  This exemption was not proposed in earlier drafts of the concept paper on negative list.  However, copyright in sound recording continues to be taxed.  Thus, it appears that copyright in theatrical as well as non-theatrical rights in cinematographic films will now remain outside the tax net.  It may however be noted that these changes will come into effect from the date when section 66B in proposed service tax law becomes effective.  In addition to this, concept papers to negative list sought to tax entry into premises (which included theaters for entertainment purposes) and hence, service tax could also apply on admissions liable to entertainment tax.  However, the proposed negative list legislation seeks to specifically exclude admission to entertainment events and access to amusement facilities, thereby granting a much needed relief to the entertainment industry.  Thus, for film industry, it is proposed that service tax will not apply on transactions between producer to distributor, distributor to exhibitor (by exempting copyrights in cinematographic films) and between exhibitor to cinema goer (by including admission to entertainment events in negative list).”

Vinita Bali, Managing Director, Britannia

“The Finance Minister has presented a mixed Budget with fundamentally positive steps in some areas, not enough in others & large concern areas like the projected fiscal deficit of 5.1%. A few of the positives include raising the plan outlay for agriculture by 18%, initiatives for R&D in agriculture, allocations for improving warehousing and storage facilities for agricultural produce. All of these, executed well and on time, will address the supply side on food and agriculture that will drive domestic demand and consumption, which is one of the key priority areas. Similarly, some of the specific measures to create maternal and child nutrition programs is an essential step in ensuring that the unacceptably high levels of malnutrition are addressed.”

Mahesh Krishnan, VP-Home Appliances, Samsung India

The benefits announced for key sectors like infrastructure, agriculture and education are bound to improve the overall economic scenario. However, the Budget does not bring any relief to the consumer electronics industry, which has been reeling under the impact of rising input costs and rupee depreciation in recent times. The rise in excise duty may lead to an increase in prices of consumer electronics products.


Anurradha Prasad, President, AROI (Association of Radio Operators for India) and Chairperson cum Managing Director, BAG Network

“Radio industry is the one medium which needs a lot of government support but, unfortunately it seems that the government is putting more pressure on the radio industry, this time by increasing the service tax from 10 to 12 per cent. This I believe is not the right thing to do however we also understand that right now the government is in a populist mode and that could be one of the reasons why the Budget did not focus much on reforms and certainly did not address the business of media or radio in particular.”


Ajay Mitra, Managing Director, India and Middle East, World Gold Council

Whilst there may be a very short-term impact to demand for gold as a result of this measure, we believe that in the longer-term, this increase (increase of customs duty on imports of gold from 2 to to 4%) will not substantially affect demand. The fundamental reasons for buying gold jewellery are unchanged. They are rooted in Indian culture and weddings. Investment demand is driven by the need to protect against inflation, ease of liquidity and the increasing use of gold as a monetized asset to secure loans.


Ashish Hemrajani, Founder and CEO, Bigtree Entertainment ( BookMyShow.com)

The service tax exemption on the entertainment industry is a very encouraging step. It would propel the industry towards bigger and better things. This move can also be viewed as a way to offer some respite to the previously challenging situation the industry faced due to heavy taxation.


Dippak Khurana, CEO & Co-Founder, Vserv.mobi

The exemption of duty on mobile phone parts is surely an ecosystem enabler as it will lower the market prices of phones which are being assembled in India. This will help us achieve not only last mile connectivity but will fuel growth of ancillary sectors such as mobile content development, mobile banking, mobile advertising etc Over all, the government realises the role that mobile devices have to play in enhancing and streamlining IT oriented citizen centric governance framework. This is reflected by two provisions in the government 1) creation of a mobile-based fertilizer management system that will provide end to-end information on movement of fertilisers and subsidies.  2) roll out Aadhaar tablet enabled payments for various government schemes in at least 50 districts within next 6 months.


However, the increase in the service tax from 10% to 12% will adversely affect the masses as mobile phone bills will become higher. Barring this negative point, the rest of the provisions in the Budget are encouraging for the sector per se.



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