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Service tax exemption to leave advertisers with surplus funds
March, 19th 2012

Service tax exemption on advertising on media platforms, excluding TV and radio, could result in availability of up to Rs 1,500 crore more to advertisers for spending on campaigns, according to industry experts.

"Given that marketing budgets of companies always take into account the service tax component, now there will be more money available to be spent on media other than TV and radio (which are not exempt from service tax)," ZenithOptimedia Managing Partner Navin Khemka said.

According to him, the total annual advertising spend in India is currently estimated at USD 5 billion (around Rs 26,000 crore), of which around 45 per cent is spent on television and radio.

"Now if other advertising media (like print, outdoor, digital) are exempt for service tax, around Rs 1,500 crore, which was earlier spent on service tax by marketers will now benefit advertising and media planning companies," he added.

In the Budget for 2012-13 Finance Minister Pranab Mukherjee announced that "selling of space or time slots for advertisements other than advertisements broadcast by radio or television" will come in negative list and will be exempt from 12 per cent service tax.

"It is a good news for growing sectors like outdoor and digital. The service tax exemption would ultimately benefit the advertisers who spend a lot on outdoor and Internet," Madison World Chairman and Managing Director Sam Balsara said.

According to the 'Pitch Madison Media Ad Outlook 2012' (PMMAO) report the Indian media advertising industry has been pegged at Rs 25,594 crore in 2011.

Commenting on the impact of the Budget proposals on media and entertainment sector, KPMG Partner Himanshu Parekh said: "Earlier advertising in print was only exempt from service tax, while TV and radio were not exempt. Now even other media like outdoor and digital are exempt."

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