Indian M&E sector pins hope on rollout of GST in April 2016 to resolve tax concerns

Industry leaders have called for simplifying the tax regime by combining a multitude of national, state & local taxes for the M&E sector at FICCI Frames 2015, currently underway in Mumbai

BestMediaInfo Bureau | Mumbai | March 27, 2015

The Indian Media & Entertainment (M&E) sector, one of the highly taxed sectors in the country, is pinning its hopes on the rollout of the Goods & Services Tax (GST) as it will simplify the tax regime by combining a multitude of national, state and local taxes. Yet, industry experts feel that there are areas of concern as to whether entertainment tax will be subsumed in GST and what the rate of GST will be. These issues were discussed at length at the session titled 'An Enabling Tax Regime for the M&E Sector' on Day Two of FICCI Frames 2015, being held in Mumbai.

In his presentation, 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, Parekh said that withholding tax in acquisition of TV programmes, placement/ carriage fee, agency commission and transponder charges were some of the pressing issues. “Other issues such as deductibility of cost of content, dual levy of service tax and 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,” he added.

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

Narayan Prabhat Ranjan, CFO, Viacom 18, felt 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, he urged.

Sujit Vaidya, CFO, Disney UTV, stated that the growth of the industry and the tax structure were not in step, which had led to many tax litigations for the industry. Observing that piracy was another key challenge for the industry, besides tax discrepancy, he stressed, “To combat piracy, the Government has to provide incentives to theatre owners to enable them to penetrate rural and Tier 2 and 3 cities by increasing the number of screens, which is far less than the desired number at present in the country.”

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

Vineet Garg, Deputy CFO, Hathway Datacom, added here, 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 had been on the rise owing to complex tax structure, which needs to be corrected.

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