M&E sector's Budget wishes

The media and entertainment sector is on the cusp of a sea change with the digitisation wave.

Not just broadcasting but other sectors in M&E -- films, radio, animation and gaming -- are also eyeing transformation, with the advent of new technologies and an ever-increasing appetite of the Indian consumer for its products.

What they want is is support from the government, not monetary but in the form of a rationalised tax structure.

The biggest issue the sector says it is facing is of multiple taxation.

Across sub-sectors, M&E executives are demanding rationalisation in taxes and an enabling environment.

The direct and indirect taxes levied on different segments are as high as 40-56 per cent.

In the broadcasting sector, for instance, cable and direct-to-home companies have been facing multiple taxation and customs and import duty issues.

The DTH segment has been asking for a reduction in the licence fee from 10 per cent to six per cent and exemption from service tax.

Harit Nagpal, managing director and chief executive officer, Tata Sky, and president, DTH Operators Association of India, said, “DTH is growing as fast as it can and the growth has been phenomenal.

“In fact, the DTH industry is contributing revenues, to the government and the broadcasters, that are disproportionate to its volume compared to the cable industry.

“Now, with the digitisation mandate, DTH would only make further inroads.

“But it requires heavy investments during this high growth stage and these are impacted by high and uneven rates of tax charged to us.

“The current tax structure exceeds 35 per cent of the revenues when you look at the various taxes and revenue share arrangements with the government.

“Given the current scenario, taxes and revenue-share put together is a big hurdle for a nascent industry which is yet to break even.

The Federation of Indian Chambers of Commerce and Industry has also demanded a reduction of licence fee in DTH and infrastructure status for the cable sector.

It said both DTH and cable services were reeling under multiple taxation and levies such as licence fee, service tax, entertainment tax, VAT on customer premises’ equipment (set-top box, dish antenna, etc), adding to as much as 56

per cent.

“Such high multiple taxation and other levies have resulted in these services becoming costlier and unaffordable for the masses. “To ensure proper growth and development of this sector, the multiple levies/taxation structure needs to be rationalised,” it said.

It also said cable TV and DTH services are essentially transmission of programmes, taxed as ‘services’ by the central government and as ‘entertainment’ by the state governments and also levied entertainment tax.

“Thus, these services suffer double taxation. These should be included in the negative list of service tax till the time a Goods and Services Tax comes into force,” it said.

To incentivise cable, it has demanded a waiver of entertainment tax by state governments for five years for cable networks migrating from analogue to digital.

On films, Ficci said the multiple tax structure on entertainment is a big problem. In addition to entertainment tax as high as 60 per cent in UP and 45 per cent in Maharashtra, service tax is levied on the multiple transactions, along with valued-added tax, stamp duty and others.

“The film sector has, in most countries, been given a preferential treatment, with GST being imposed at a rate far below the standard rate,” says Ficci.

Instead, it says, the film industry deserves to be nurtured, encouraged and supported.

According to Hiren Gada, director at Shemaroo Entertainment, the service tax on production has put margins under pressure for the film industry.

He also wants excise duty on VCDs and DVDs to be abolished, with the sector struggling with piracy issues.

“If GST can be fast-tracked, it will be a boon for the industry.

“There are larger opportunities if the government takes the initiative and plays a catalysing role in the growth of M&E,” he said.

The sector is also asking for exemption of input services for film making from service tax and exemption of service tax on digital cinema services, apart from enabling institutional financing options.

Complete coverage: Union Budget 2013-14

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