Finance Minister Pranab Mukherjee gave some shock to the direct-to-home (DTH) players, as his Ministry has hiked customs duty on import of set-top boxes (STBs) by 5 per cent from the present Nil per cent.

"Import of STBs do not attract any customs duty, this will be raised to five per cent as the production of the devices has picked up in the country." Pranab Mukherjee said, while presenting the budget for fiscal 2009-10 in the Lok Sabha.

Excise duty on STBs were exempted in 2003 to facilitate introduction of Conditional Access System (CAS) in the country. In the Budget 2006, the exemption on excise duty was withdrawn, but customs duty was reduced from 15 per cent to Nil.

However, there was no corresponding reduction of customs duty on inputs used in the manufacturing of STBs. This has resulted into another case of inverted customs duty structure.

Now, in the Budget 2009, the correction of the anomaly has been achieved by increasing customs duty on the import of STBs from Nil to 5 per cent, and also allowing import of inputs at five per cent.

Salil Kapoor, chief operating officer, Dish TV, says, "The additional burden of 5 per cent tax on STB will hinder the growth and will discourage the DTH industry from expanding business; this tax hike will be passed on to the customers."

"Although we do welcome the removal of FBT and introduction of GST (Gods & services tax), which will provide some relief to DTH industry from multiple taxes from centre and the states. Focus on building infrastructure will increase income and purchasing power, which will add impetus to the TV industry and DTH service providers." Kapoor adds.