Budget shows the finger to digitization

17 Mar,2012

 

By A Correspondent

 

In the end, one hopes that the angel is in the details. On Day 3 of the annual Frames jamboree put up by industry body FICCI, one hoped that Finance Minister Pranab Mukherjee will announce sops for digitization. The broad proposals didn’t. And for once, one hopes that rather than find the devil, there’s an angel hidden out there.

 

Okay, there are some nice things in there. Like sops early stage funding from Venture Capital companies to media companies. But the IBF director-finance Naresh Chahal’s outrage was understandable. The government – and infobroad secretary Uday Varma re-iterated it – is firm on the June 30 deadline for the four metros. “If India has to grow, digitization will be a vital ingredient for its growth and thus it is important that we be technologically updated. Digitization is here to stay and we need to embrace this change.” While set-top boxes may not have found favour, LED and LCD television panels and parts of mobile phone memory cards have been looked at favourably by Mr Mukherjee.

 

So while the FM hasn’t made life tough by adding taxes, the fact that he didn’t cut or even totally drop duties on set-top boxes was a huge dampner. Doubtless, the economically weaker sections in the four metros of Kolkata, Chennai, Mumbai and New Delhi will be forced to cough up monies if they want to catch non-terrestrial entertainment.

 

Meanwhile, Mr Rakesh Jariwala, Partner & Tax Expert, Media and Entertainment at leading consulting firm Ernst & Young said:  “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.”

 

The non-inclusion of advertising in television and print in the negative list for service tax is also a dampner given that the levy has been increase from 10 to 12 per cent. This means that there will be a tighter squeeze on adspend budgets. While advertising on big ticket shows will not suffer, the small monies spent on digital, outdoor, radio and other experimental/BTL activities may take a hit given the 2 per cent additional squeeze.

 

And then there’s an increase in excise duty too which will increase the burden on M&E professionals and corporates and with the easing of Income Tax slabs not quite balancing the increase in expenses elsewhere.

 

However, the film industry and entertainment event organisers may find some benefit with the recommendations.”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,” Mr Jariwalla added. “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),” he said.

 

For entrepreneurs just getting into media and entertainment who were cold-shouldered by venture cap companies given the restrictions, the easing up of restrictions on funding should be a welcome move.

 

Please refer to Microsite on Budget 2012 for the following stories which were uploaded on Saturday, March 17:

Budget 2012: Ernst & Young Analysis of Direct & Indirect Tax proposals in M&E

Budget 2012: What it means for India Inc

Budget 2012: Reactions from Stakeholders

Budget 2012: Video reactions from trade

Budget 2012: Entrepreneurs may find fund-raising easy with removal of restrictions for VCs

Budget 2012: Ranjona Banerji on how TV Channels fared with their Budget specials

Budget 2012 Anchor: 5 M&E ways in which the govt can make monies on the Budget

 

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