Service tax on ads in digital media, print spared [updated]

10 Jul,2014

By A Correspondent

 

The Budget spells bad news for the digital media in India.

 

To broaden the tax base in Service Tax, sale of space or time for advertisements in broadcast media has been extended to cover such sales on other segments like online and mobile advertising. Announcing the tax proposals, Finance Minister Arun Jaitley said during his speech that sale of space for advertisements in print media however would remain excluded from service tax.

 

The Finance Minister said that the tax proposals on the indirect taxes side are estimated to yield Rs.7525 crore during 2014-15.

Reacting sharply to the re-imposition of service tax on online advertising in the Union Budget, industry association Internet and Mobile Association of India (IAMAI) has said that this announcement is the biggest dampener not only for the digital medium but for the industry as a whole.

It may be recalled that two years ago, this sector was kept under the negative list of service tax as a gesture of support to this fledgling industry. The legitimate expectation of this industry was that such exemption would continue for at least 3-5 years as is normally the case.

Unfortunately, the present Budget while continuing with the broad trends of the previous two budgets, has curiously decided to re-impose service tax on the industry at a time when the industry, based on the Prime Minister’s pre-poll announcements and the great support that the medium had provided to the PM personally and to the current ruling party, was expecting some more hand holding and support from the government. For the industry, this has come as a very unpleasant surprise. Reacting to this, Dr Subho Ray, President, IAMAI, was hopeful that this was just a proofing error in the large budgetary exercise and once this was brought to the notice of the Finance Minister and other senior officials, this announcement would be withdrawn. “Through this communication, we appeal to the Finance Minister to withdraw the announcement at the earliest,” he said.

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