M&E sector pins hope on rollout of GST in April 2016 | FICCI FRAMES

MUMBAI, March 26, 2015. The Indian Media & Entertainment (M&E) sector, one of the most highly taxed sectors in the country, is pinning its hopes on the rollout of the Goods & Services Tax (GST) as it would simplify the tax regime by combining a multitude of national, state and local taxes. Yet, there are areas of concern as whether entertainment tax would be subsumed in GST and what the rate of GST would be.

These sentiments were expressed by industry stalwarts on the second day FICCI FRAMES 2015,  in a session on‘An Enabling Tax Regime for the M&E Sector’.

In his presentation, Mr. Himanshu Parekh, Executive Director, KPMG, highlighted some of the key concerns of the film industry such as service tax loss in respect of theatrical revenues; ambiguities surrounding Rule 9A/9B of whether it extends to non-theatrical rights, is it discretionary or mandatory and does it override other provisions of the IT Act; AOP exposure and entertainment tax.

Speaking about the taxation woes of broadcasting companies, Mr. Parekh said that withholding tax in acquisition of TV programs; placement / carriage fee; agency commission and transponder charges were some of the pressing issues. He added that other issues such as deductibility of cost of content; dual levy of service tax & VAT on content; carry forward of loss on amalgamation and taxation of foreign telecasting companies, were not allowing the industry to flourish as there were a number of ambiguities surrounding these issues.

The withholding tax on discount on sale of STB / RCV; double levy of tax on installation & activation charges and double levy of tax on RCV, were the key concerns of the DTH/cable sector, stated Mr. Parekh

Mr. Narayan Prabhat Ranjan, CFO, Viacom 18, pointed out that the sector was being unnecessarily burdened with additional taxes such as levying of both service tax and VAT on the same product. He added that most of the litigation in the sector was due to complexity and ambiguity in regulations. Hence, the government should look at these policies and regulations at the earliest to enable the M&E industry to sustain itself.

Mr. Sujit Vaidya, CFO, Disney UTV, stated that the growth of the industry and the tax structure were not in step which has led so many tax litigations for the industry. He added that piracy was another key challenge for the industry besides tax discrepancy. To combat piracy, he urged the government to provide incentives to theatre owners to enable them to penetrate rural and tier 2 & 3 cities by increasing the number of screens, which was far less than the desired number at present in the country.

Mr. G Sambasivan, CFO, Tata Sky Ltd, said that the present tax structure of the M&E sector is a dampener for investors as they are not able to predict favourable return on their investments. He suggested that the government should consider lowering of taxes, which were very high and also look at simplifying the overall tax regime.

Mr. Vineet Garg, Deputy CFO, Hathway Datacom, said that the government should facilitate the industry by easing taxation compliance  and provide tax rebate to the sector. He added that the number of tax litigations have been on the rise owing to complex tax structure which needs to be corrected.

We welcome your comments at letters@friedeye.com