Budget review for M&E: Rakesh Jariwala, E&Y

28 Feb,2013

By Rakesh Jariwala

Tax Partner, Ernst & Young


Partial relief for the film sector as the non-theatrical revenues of a movie are now brought back in the tax net.  Producers and distributors will be able to recover a portion of their input credits with this change, thus mitigating a portion of the adverse impact created by the complete exemption granted last year.  For non-film business, impact of removal of exemption to copyright transactions will have to be measured in terms of eligibility of the service receiver to take credits.  However, the question of double taxation of transactions in intangible rights (between service tax and Value added tax) remains unanswered.


The budget will increase the income tax cost on account increase in corporate income tax surcharge from 5% to 10%.  Any outbound remittance towards IP royalties (except film exhibition royalties) and/ or fees for technical services will be subject to increased 25% tax rate, subject to a better tax treaty rate. Investment in specific plant and machinery towards manufacture of article or thing by media companies in excess of 100 Crores will qualify for additional tax allowance at 15%.  Increase in import duty for set top boxes from 5% to 10% may increase the cost for DTH/ Cable operators. Applying service tax on exploitation of copyright in cinematograph film with the exception of exhibition rights should result in improved credit situation for the industry.


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