14 Mar,2012

Rakesh Jariwala, partner and tax expert, Ernst & Young and one of the finest minds in determining the taxing truths for the Indian media and entertainment sector, presents his budget wishlist to MxMIndia


– High entertainment tax burden on industry that showcases Indian art and culture to the world is totally unjustified. Hence, the entertainment tax structure across the country should be rationalized by bringing down rates of entertainment taxes in important states like Maharashtra, Delhi, UP, West Bengal, Gujarat, Haryana and others.


– Film producer generates revenues from theatrical and non-theatrical rights both of which are liable to service tax. Separately, various State Governments classify ‘copyright’ as goods thereby levying Value Added Tax on transfer/ licensing of copyright on non theatrical streams. To prevent multiple taxation, the government should exempt ‘copyright in theatrical distribution of cinematograph films’ from service tax levy and continue this exemption in the negative list.


– The Government should take a cue from steps taken by federal/ state governments across the world such as Singapore, UK, Germany, South Africa, US and incentivise the film industry through a well defined plan, for both, content creation and infrastructure. This will help the industry parallel its western counterpart.


– The concessional rate of 10% on gross basis, as prevalent for non-resident sportsperson for participation in any sport in India should be extended for taxation of foreign artists, performers and entertainers.


– An alternate mechanism for obtaining Income-tax Clearance Certificate (‘TCC’) for clearance or a monetary threshold for triggering TCC provisions is provided as the current set up provisions and administrative burden discourages foreign talent to shoot in India.


– A clarification from the government that the payment for grant of distribution rights to foreign telecasting companies is not for the ‘copyright’ in the content and hence, is not in the nature of royalty thereby preventing protracted litigation.


– Entry into premises such as films, theaters, amusement parks could be liable to service tax under the negative list based service tax legislation. Since these activities are already liable to high entertainment taxes by states, entry into premise where entertainment is held should be excluded from service tax levy.


– The Government should grant relief from levy and collection of service tax on subscription charges received by cable operators and DTH operators since these charges are already subject to entertainment tax.


– Rakesh Jariwala is Partner and Tax Expert, Ernst & Young. Please log on to on Saturday, March 17 for our budget special.


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