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New Delhi: Finance Minister Nirmala Sitharaman is all set to present the Union Budget on February 1, 2025. In Sitharaman’s eighth budget speech, the advertising, media, and marketing sector eagerly awaits a budget that will drive digital innovation, clarify advertising guidelines, and promote AI-driven personalisation.
As salaried taxpayers eagerly await rebates and tax reductions under both the tax regimes from the annual budget, key stakeholders hope for government initiatives that boost consumption after a tepid festive quarter, simplification of GST compliance frameworks, focus on digitisation incentives and prioritise AI, content creation, and digital literacy.
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Sharing his expectations from the budget, Ashish Bhasin, Founder of The Bhasin Consulting Group said, “My experience has shown me that the rule of thumb is that for every 1% GDP growth, advertising grows by 1.5%. For example, if GDP grows at 6%, advertising will grow at 9%, which is about 50% more.”
Therefore, I expect a growth-oriented budget. Hopefully, the monsoons will be good, and there will be several programs to help generate further rural demand, which we are already seeing is picking up well. This will be particularly beneficial for the FMCG sector.”
Additionally, Bhasin also expects the government to give some relaxation in personal income tax, and schemes for the urban poor leading to more availability of cash in hand, hence further boosting consumption.
Industry stakeholders also expect a simplification when it comes to tax filing so that they can focus on other core aspects of the business to drive growth.
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Asha Ravaliya, CFO of BC Web Wise, said, “There is a strong demand for further simplification of GST compliance frameworks to reduce bureaucratic hurdles.”
Elaborating further on the complexity of filing taxes, Bhasin said, “The industry does not mind paying taxes, but it is the complexity of the bureaucracy and the hassles involved in paying taxes that crush the industry. On multiple occasions, with GST, you have to get numbers and file them in different states.
As a result, a lot of the energy that should be going into building brands and the creative side of the business actually goes into handling the bureaucracy around the payment of taxes.”
Citing an example to further prove his point, Bhasin said, “Different TDS rates in a business, like a media business, sometimes exceed 2%, and the TDS itself can take away more than 100% of your profits at times, leading to huge cash flow issues.”
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Sounding an alarm about the poor health of the Fast-Moving Consumer Goods (FMCG) sector, Yousuf Rangoonwala, Founder of Kakkoii Entertainment said, “The FMCG sector is not performing well, which is alarming as it typically serves as a barometer for the purchasing power of the general population. The current struggles in FMCG are compared to historical economic downturns, such as the Great Depression in the U.S.”
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To add, he also suggests that Employee Stock Ownership Plans (ESOPs) should be taxed upon sale rather than at the vesting stage. This will help is using ESOP’s as a tax efficient tool to attract talent especially in start-ups."
Digitisation incentives
Sachin Shah, Partner, National Tax Lead for Media and Entertainment at EY stressed that the need for integrating cutting-edge technologies is not just a trend but a significant investment, as the industry evolves to utilise state-of-the-art capabilities.
“The surge in digital marketing and the imperative for brands to amplify their online footprint underscore the sector's pivotal role in fueling economic growth. To sustain this progress, we urge the upcoming Union Budget to firstly rationalise the withholding tax rates and fast-track refunds, which are adversely impacting cash flow for the advertising industry, and secondly, bring tax sops for incentivizing the setup of media and marketing centres of excellence (COE) in India for global media support,” quoted Shah.
Ravaliya also mentioned that while extended tax holidays for startups and small tech enterprises have alleviated some financial burdens, the investment required for advanced technologies like AI often exceeds their limited budgets.
“Introducing additional R&D tax credits to foster innovation would undoubtedly encourage entrepreneurs to pursue groundbreaking ventures. Providing subsidised access to digital tools and SaaS platforms will enable MSMEs to enhance their operational efficiency,” she noted.
Moreover, she expects the government to expand low-interest loan schemes specifically designed for MSME digitisation projects will drive the adoption of new digital technologies.
Emphasis on upskilling
To make sure that India does not miss the AI bandwagon, industry players are hoping for a budget that will focus on skill enhancement, particularly in tier-2 and tier-3 cities of the country.
Therefore, recognising the acute shortage of skilled talent to support the AI mission, Ravaliya anticipates “AI training programs to gain traction in rural areas.”
“Subsidising such programs would empower smaller enterprises to adopt AI tools and technologies, ultimately fueling growth across the broader digital and technology sectors. Moreover, introducing schemes for skill development in support of creating alternative employment opportunities in sectors impacted by AI will also help tackle unemployment,” stated Ravilya.
Boost to digital infrastructure
Ravaliya (BC Web Wise) is also counting on the upcoming Union Budget for the reforms aimed at facilitating 5G adoption—such as making devices more affordable and improving spectrum allocation which is crucial for enhancing nationwide connectivity and unlocking the full potential of digital transformation.
Pointing out the delay in implementing the BharatNet project in remote areas, Ravaliya said that additional funding to accelerate the completion of BharatNet and ensure last-mile connectivity is critical to ride the digital wave.
Last but not least
Referring to the fact that the government itself is one of the largest advertisers in the country, “Yet they often don't pay their bills on time or pay the full agency commission, contrary to what they claim. Sometimes their actions and words don't match,” Bhasin highlighted.
Furthermore, he said, “To begin with, all government, semi-government, PSU, and similar companies should be instructed to pay their bills on time and to pay fair commissions and charges to the agencies. This would be a huge help, particularly to smaller agencies, and would also set a good example for other clients to follow. If the government advertisers can stick to what the government says, it would be a significant help for the advertising industry.”
Last but not least, Bhasin brought out how the government tends to treat advertising as if it's a wasteful expenditure. “However, advertising is actually an investment in building brands and creating demand, which is beneficial for the economy. Often, income tax disallows advertising expenses or makes it difficult for clients to claim them.
I believe the government should provide incentives for advertising spends, recognising it as an investment rather than a wasteful expense. Also, there should be a change in attitude and mindset towards how advertising is treated.”
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Summing it up in the words of Prady Kumaar, CEO and Co-Founder of NP Digital India, “Advertisers are looking for government support in the form of incentives for digital adoption, increased funding for technology upskilling, investment in digital infrastructure, and policies that promote a fair and transparent advertising ecosystem.”