M&E industry expresses 'cautious optimism' over a 'mixed bag' Budget

Media and entertainment industry honchos see some positive and some negative impacts of Finance Minister Arun Jaitley's Budget and raise concern over the rise in excise duty and cess

Archit Ambekar | Mumbai | March 1, 2016

The Union Budget has announced a lot of measures that could add to the ease of doing business in India. Cess has increased, though and the much anticipated Goods and Service Tax now seems to be a long way away. The media and entertainment industry's reaction to the Union Budget 2016 was mixed, therefore.

BestMediaInfo.com asked some industry top brass to share their views on the Union Budget. Here is what they had to say:

Sudhanshu Vats

Sudhanshu Vats, Group CEO, Viacom18, and Chairman, National Media and Entertainment Committee, CII:

Kudos to the government for presenting a disciplined and inclusive budget. The emphasis on rural development and commitment to the fiscal deficit target augur well for the economy in the long-run. The proposal for a more conducive excise duty regime for STBs and other 'entertainment-access devices' is welcome. While many of us from the industry were anticipating more sector-specific announcements, I'm sure that this budget will benefit the larger economy and therefore, by extension, have a positive impact on our industry as well.

MK Anand

MK Anand, MD and CEO, Times Network:

Digitization, in my opinion is the most important factor for the broadcast sector currently, we are very happy about the excise duty changes proposed for Set Top boxes which will help in the last mile infrastructure of DAS 3 and 4. Overall a stable and positive fiscal situation is good for the economy and that will support our ad sales growth projections. All in all, Budget 2016 looks good for the broadcast sector.

NP Singh

NP Singh, CEO, Sony Pictures Networks India:

From an overall Budget perspective, the enhanced public spending through various social schemes and infrastructure investments should further help to expedite economic growth. The government has also balanced spending with fiscal prudence by reigning in fiscal deficit. From a media industry perspective, there were no major changes. I feel that a change in the definition of industrial undertaking for the services industry as well as a push to define the GST roadmap would have been sector-positive.

There is a landmark attempt in the Budget to simplify the tax administration which should herald a friendlier tax regime.

Girish Srivastava, Secretary General, Indian Broadcasters Foundation:

We are happy to note that FM has addressed some of the concerns on the tax and policy matters, however the industry at large, remains disappointed on not getting the attention on some key issues such as carry forward of losses, in case of amalgamation or merger for service industry under the industrial undertaking under Section 72 A of the Income Tax Act, 1961. It is also unfortunate that Media and Entertainment industry, which has been playing a critical role in the digital initiative of the government, is being denied this benefit whereas other service sectors like Software, Telecom etc. are availing these benefits. IBF will take up the issues as above with the Finance Ministry in its post budget consultations.

Harrish M Bhatia

Harrish M Bhatia, CEO, 94.3 MY FM:

There is no specific announcement for the M&E sector. None of the issues we had highlighted earlier have been addressed. We were hoping the following will be addressed - waiver or reduction in custom duties for import of broadcasting equipment; exemption in service tax as for print publications and OTF to be collected in instalment and not one time, just as in the telecom industry.

Ashish Bhasin

Ashish Bhasin, Chairman and CEO South Asia, Dentsu Aegis Network:

Overall there are some positives and some negatives in the Budget. On the positive side not increasing the service tax is a positive, particularly for the advertising and media sector. General expectation was that Service Tax may go up in anticipation of higher GST rates.

Controlling the fiscal deficit and several steps to invigorate the rural economy and rural consumption are positive signals. A rural consumption revival will help the economy and the advertising and media sector tremendously. On the negative side there was an expectation, based on what the Finance Minister said in the past, that corporate tax rates would come down. That is not to be so for most large companies. Introducing double taxation on dividends is also a negative.  On balance this seems to me to be a mixed bag Budget with a positive bias. If it is able to spur overall economic growth, we could see good times ahead for the advertising and media sector.

Madhukar Sabnavis

Madhukar Sabnavis, Vice-Chairman and Director – Client Relations, Ogilvy & Mather India:

It is much as I expected- fairly neutral. It's in keeping with the Finance Minister's philosophy- no big bang, just evolutionary changes in a planned direction. Rural was expected to be an area of focus and he has given it enough importance. Similarly, in keeping with the mood around - SMEs and start-ups have got special concessions. Many tax concessions and money allocations have been made specifically for services aimed at the lower income groups - from health to education to housing. He has also provided relief for small tax payers. Again in keeping with the mood around, he has taxed the rich and made things considered for the 'upper class' like cars, tobacco products and jewellery more expensive.

I hope all these put some money into the economy to generate consumer demand at the ground level. And provide some stimulus for growth at the business level through investments. One would have loved to see some strong announcements that would give us confidence that ground demand would surge! However, that is not so.

So, it will be a wait and watch from a marketing and advertising point of view. If you total up all the “little” things, it could provide impetus to rural demand. And that should be good for marketers. However, it's hard to see how much the impact will be and whether the “little” things will get quickly implemented at the ground level. Hence, one is viewing things with “cautious optimism”.

Debraj Tripathy

Debraj Tripathy, Managing Director, MediaCom:

One of the key things that I was looking forward to was easing up of service tax payment for the industry. There has been no reference to this in the Budget. So things stand as they are.

The proposal to reduce basic custom duty on wood chips and particles for manufacture of paper and newsprint, from five per cent to nil, will bring down newsprint costs for the print industry. The proposed change in excise duty structure on STBs, routers and modems will lead to lower STB prices – (which is) a definite positive for cable and DTH companies.

Sanjeev Gupta

Sanjeev Gupta, MD, Global Advertisers:

We are glad that there is no increase in taxes. Since the government is said to be pro-development and has allotted significant money for the rural infrastructure, railways and road development, we think it's a positive sign for our future. We are also seeing great potential in expanding our reach to small cities now. The finance minister has also hinted at amending the Motor Vehicles Act for better transportation facility in the country. This may give us the opportunity to position our ads more effectively while on the move. We feel that in this critical economic condition, the Budget has been so far satisfactory for the advertising industry.

Rakesh Jariwala, Partner and Head, Media and Entertainment Tax Advisory, India, Ernst & Young:

As part of the Budget proposals, India has levied an equalization levy - what is known as 'Google tax' globally. The tax @ six per cent of the consideration will apply on services relating to online advertisement, provisions on online ad space or other facility or services for the purpose of online advertisement, when such services are provided by a non-resident to either an Indian resident or a non-resident having a permanent establishment in India. The payer for these services is required to deduct six per cent prior to making the payment. This is the first time that online services are being taxed in India.

Harish Bijoor

Harish Bijoor, Founder at Harish Bijoor Consultants:

I like this Arun Jaitley Budget. It aims to correct. It does not aim to please. The focus is on agriculture, a very important facet of our economy that needs correcting. An allocation of Rs 87,500 crore to agriculture is a good one.

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