What M&E wants from this year’s Budget

25 Feb,2013

 

By Ananya Saha and Meghna Sharma

 

Girish Agarwal, Promoter Director, DB Corp Ltd

Fundamental need of the hour is to boost the economy, which is essential for growth of M&E. The following steps are expected for sustained economic growth:

  • The budget should send a clear message of “Stability, credibility and long-term vision for reforms”.
  • Government revenues should increase without hurting growth while strict control on expenditure (especially non-plan) is expected from the budget.
  • Clear roadmap for reforms/key bills viz.: Companies Bill, Mining, GST, DTC, Insurance, land acquisition etc. is expected.
  • With rise in inflation and reduced earnings, savings have substantially gone down over the past 2-3 years. Appropriate tax breaks would boost savings.

 

The above basic steps should result in fresh and long term investments from domestic as well as international markets. Old policies for governing M&E sector must be revisited and reworked considering current business scenario. Policies should be framed in such a fashion that decisions at Govt. level are smooth and fast.

 

For Radio industry, we expect Govt. to roll out old pending 3rd phase of auction, immediately with clear transparent bidding process. We expect the 3rd phase license with larger period validity and also extension of time period to 15 years, for players related to 2nd phase of bidding. Prior to the same, we expect Govt. to address music royalty issue along with long pending demand of radio players of relay of news bulletins in FM radio. Further, renewal of 2nd phase of license, after expiry of its period, needs to be worked out in an acceptable and reasonable valuation, in order to ensure adequate return on investment for all radio players.

 

T Gangadhar, Managing Director, India, MEC

It is important for the government to create policies that stimulate taxes and widen the tax base, not necessarily by lowering the taxes. It is important that in current economic situation, to raise consumer sentiment. We have been hearing of uniform GST, which has not been undertaken yet. Also, it is important to lower interest rates.

 

 

 

Rakesh Jariwala, Partner, Tax and Regulatory Advisory Services, Ernst & Young

In the Direct tax category:

  • Reintroduce erstwhile benefit available under Section 80-IB of the Income-tax Act, 1961 – profit linked deduction for multiplexes to boost their growth for tier 2 and tier 3 cities
  • Introduce alternate mechanism or a monetary threshold for obtaining income-tax clearance for foreign performers, entertainers, etc before departing from India as the procedure is time consuming and onerous
  • Introduce incentives for content creation and infrastructure to encourage the Indian film industry
  • Currently, there is uncertainty with respect to income attributable to India in case of Foreign Telecasting Companies (‘FTCs’). Guidance should be provided by way of specific provisions for determining taxable income of FTCs.

 

Indirect tax:

  • Provide exemption from service tax on costs of film making in line with the exemption provided on temporary transfer of copyright in cinematograph films
  • Reinstate the exemption on service tax on services provided by digital cinema service distributors in a digitized encrypted format transmitted directly to a cinema theatre for exhibition – this exemption was withdrawn with the introduction of the negative list based service tax legislation
  • Clarify that service tax is not attracted in case of post production services provided in respect of content temporarily imported into India for the purpose of re-export
  • Exempt from service tax, services rendered by players and coaches to private sports leagues / bodies in line with the exemption provided for services to recognised sports leagues / bodies
  • Subsume entertainment tax in the proposed Goods and Services Tax legislation without creating a window for its levy at the local or state level to ensure simplicity in the tax structure

 

M&E industry is expected to outgrow the Indian economy with an expected cumulative annual growth rate of around 15% over the next four years. To keep up the momentum, the industry deserves tax incentives in the upcoming Finance Bill, 2013 thereby providing an impetus to the industry and bolstering growth.

 

Budget 2012 was a bag of mixed beans and a budget wherein the M&E industry was not given its share of adequate encouragement. Key highlights are cited below:

Incentives:

Indirect tax

  • Exemption of service tax on temporary transfer of copyrights in cinematograph films
  • Inclusion of admission to entertainment events and amusement parks in negative list of taxable services
  • In addition to the print sector, advertisements in media (except radio and television) including the internet or in outdoor media shall not be liable to service tax
  • Services provided in capacity of referee, umpire, coach or manager to recognised sports body for participating in tournaments shall not be liable to service tax

 

Dampeners for M&E industry:

Direct tax

  • Retrospective amendment to the definition of royalty thereby characterising payments for use of computer software, transponder, information databases, uplinking facilities, leased lines, etc as royalty under domestic tax laws. Hence, impacting the use of digital media
  • Tax rate of non-resident sports persons and sports associations increased from 10% to 20%

 

Indirect tax

  • Levy of service tax on costs on film-making
  • Withdrawal of exemption of service tax on digital distribution of films tantamounting to the levy of service tax on such services
  • Levy of service tax on services provided by players and coaches to private sports leagues / bodies

 

 

Tarun Katial, CEO, Reliance Broadcast Network

For the broadcasting industries of radio and television we look forward to clarity, uniformity and relief from taxes. Advertisement in free to air mediums like radio should be treated differently and lower or nil service tax should apply for the same, aligning with the print and out of home industries. Also, FDI in non-news radio operations needs to be brought at par with television broadcasting. Customs duty on radio and television broadcast equipment should also be relaxed.

 

The TV Broadcast and Distribution industry is already reaping benefits from the success of the digitization initiated by the Government. We look forward to necessary fiscal incentives in the form removal/ reduction of multiple taxes and levies and regulations which ensure transparency and power of choice to the end customer.

 

Sandeep Ladda, Executive Director/Partner and National Leader – Entertainment & Media – Tax and Regulatory, PwC

On the direct tax front, we could look at the following key areas:

  • Clarification on the applicability of withholding tax provisions on discount offered by DTH operators for selling recharge coupons through subscribers to third parties and on payments made by TV channel companies to uplinking companies
  • Providing a clarification stating that benefits of carry forward and set off of unabsorbed losses in amalgamation or demerger etc. also available to service sector companies
  • Proposal to sign more Co-production treaties, to get the tax credits and subsidy benefits
  • To provide a 10-year tax holiday to exports in the gaming, animation and the VFX (visual effects) industry for Indian content development, as they are emerging sectors (whether or not these are set up in an SEZ)

 

Key expectations on the indirect tax front include:

  • To promote the domestic gaming industry, excise duty on local manufacture of gaming content could be brought down to 0%
  • Service tax applicability to the DTH industry could be eased for a limited period till the phased implementation of digitization is complete
  • Copyright services could be excluded from service tax net to avoid dual levy of service tax and VAT
  • Multiplex operators could be exempted from levy of service tax on property rentals and to distributors for exploitation of cinematographic rights, till GST is introduced to result in a seamless pass through of these indirect taxes

 

The industry has been growing at a pace of around 17 percent YoY and is expected to maintain the momentum. The recent liberalization of foreign investment norms for a majority of broadcasting carriage segments and the radio phase III roll out will surely provide a fillip to the entertainment and media sector. Similar liberalization measures could be extended to the remaining broadcasting carriage segments like local cable operators. Also, the Phase III rollout could be implemented early for the industry to reap in the allied benefits flowing from the same.

 

There were a few positive steps seen in the 2012 budget such as eligibility of investment linked deduction to hotel owners even if operations are carried out by third parties and service tax exemption on temporary transfer of copyright in cinematographic films. However, on the whole, budget of 2012 left a lot to be desired:

  • Retrospective amendments to widen the scope of royalty by including payments for transmission by satellite cable, optic fibre etc. as royalty were not expected. The relative standing of some of these retrospective amendments vis a vis India’s tax treaties has also been questioned by recent tax tribunal decisions. This has only added to existing confusion surrounding such royalty payments.
  • The budget also introduced provisions casting obligations on a non resident having no presence in India to withhold tax on any payments being made to a non resident of income accruing in India. This measure has impacted some of the India content broadcasting transactions happening between non resident parties.
  • Tax rates in case of non-resident, non-citizen sportspersons, non resident sports associations were increased from 10 percent to 20 percent on gross basis. Similarly, non resident entertainers were also brought under the tax net @ 20 percent on gross basis. Both these measures were burdensome.

 

Sunil Lulla, Managing Director and CEO, Times Television Network

The burden on the growing service sector needs to be reduced, so it may accelerate India’s growth. In prior years, in recent times, we have not seen anything progressive as such via the budget. Investment norms in some parts of the sector have already changed, for encouraging investment. The industry has been asking for lower duties on STBs so that digitization can progress and benefit millions of consumers. This is vital. As for the last year, the economy has been slow, sluggish and behind expectations – 2012 has been a disaster!

 

 

Responses are in alphabetical order by surname.

 

Post a Comment 

Comments are closed.

Today's Top Stories
Videos