The media and entertainment industry is buoyant with the announcement of the reduction in the corporate tax rate from 30% to 22% (25.17% including surcharge) as this is directly going to improve the bottom line of media companies.
India’s print industry has been struggling because of falling revenue and increasing cost. For these companies, the rate cut has come as a breather during their most challenging time.
In Q1, HT Media had posted a loss of Rs 148 crore. Other players such as Dainik Bhaskar also saw their revenues falling.
Girish Agarwaal, Promoter Director, DB Corp, said, "We are happy and positive to note the Government's decision of lowering the Corporate Tax rate to an effective 25% from earlier over 30%. By lowering of income tax rate, the government has fulfilled a long-standing request of India Inc. We really appreciate this bold step.”
Welcoming the move, India TV MD and CEO Ritu Dhawan said that this will boost the overall economy in a big way."
"Our expectations are high, I am confident that the media industry will benefit greatly. The reduced corporate tax will boost bottomlines of companies. Overall advertising is expected to jump, which will make toplines of media companies grow,” she said.
The move will allow corporates to make more investment in setting up new facilities, research and development and beefing up the advertising budget.
Agarwaal added, “Reduction in tax rate will significantly improve profitability and thereby conserve funds in the hands of Corporates for further investments which in turn is ought to have a multi-fold positive effect on the overall economic growth. With Corporate tax rate reduction, India comes at par with global Corporate taxation standards and norms which is a long term positive for attracting Global Investment. Such Stimulus packages have the potential to give a positive boost to improved consumption sentiment, thus improving GDP growth prospects.”
The move has the potential to kick start the investment cycle in the country, which would give the much-needed impetus to India’s media industry.
Jehil Thakkar, Partner at Deloitte India, said, “I think there is going to be both direct and indirect benefits. The direct benefits will be from the standpoint of a decrease in the tax rate, which will help increase profits as well as cash flow. As the media industry is in stress right now because of the dip in advertising, the slash in basic corporate tax will be a direct benefit. Whereas from indirect benefits standpoint, this move should work towards helping revive sentiments and the provision around no taxation for new companies. This may encourage new people to launch new companies, new product launches etcetera which will drive advertising, and it will be an indirect benefit for the industry to come back to a certain level of growth."
Karan Bedi, CEO - MX Player, said “This is a fantastic move on the part of the government that will spur growth, investment and the economy. For the media sector, it will also have a very positive impact as advertising is sure to benefit.”