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Budget 2009: Help
July, 03rd 2009

Realise the potential and help us grow and develop. That seems to be the message that the Indian media and entertainment (M&E) sector is trying to convey to the Finance Minister Pranab Mukherjee.

After a disappointing Union Budget 2008, the sector has some reason to cheer, as the Union Budget 2009 promises some relief for the segment as a whole, according to the top minister in the Information and Broadcasting (I&B) Ministry.

Ambika Soni, I&B Minister, has exclusively informed, that her Ministry is looking into rationalisation of high taxes and that two sub-committees have already been constitute to look into the matter.

Soni says that a sub-committee has been formed to look into rationalisation of entertainment tax levied by state governments on sectors like conditional access system (CAS), direct-to-home (DTH) services and multiplexes among others.

The committee has members from the Cable Operators Federation of India (COFI), the MSO Alliance, DTH players and entertainment commissioners of states like Delhi, Uttar Pradesh and Maharashtra, among others.

"Both DTH services and cable services face heavy burden of multiple taxation and levies - such as licence fee, service tax, entertainment tax, value added tax (VAT) on customer premises equipment - which cumulatively add up to as much as 56 per cent. This is making these services costlier and unaffordable for the masses." says Salil Kapoor, chief operating officer, Dish TV.

Kapoor urges that the service tax, entertainment tax and VAT to be replaced by unified single Goods and Service Tax, that the Government intends to introduce with effect from April 1, 2010. The DTH industry has been complaining about the multiple taxes that it pays adding up to nearly 45 per cent.

Soni informs that the other sub-committee has been formed for rationalisation of right-of-way charges. The Minister believes that the Finance Minister will rationalise the tax structure for laying optic fibres for offering digital entertainment services as well as integrating the last mile operator.

The second sub-committee consists of members from the Telecom Ministry, Urban Development Ministry, Power Ministry and telecom regulator TRAI. Since entertainment tax comes under the jurisdiction of state governments, representatives of Delhi, Uttar Pradesh, Tamil Nadu, Maharashtra and Gujarat, among others, are also be part of the sub-committee.

I&B Ministry has suggested a five-year tax holiday for those offering digital television services. It has suggested the tax holiday for digital cable, DTH, satellite-based cable Headend in the Sky (HITS) and similar service providers distributing digital content.

For the Union Budget 2009, the industry, in addition to asking for specific concessions and exemptions, is also demanding duties to be at par with the IT sector. It also wants the FM to realise that it's different from any other manufacturing companies and, therefore, should be taxed differently.

The $ 17 billion industry, which is growing at a 12 per cent CAGR, is demanding greater attention from the government. The access to global entertainment, outsourcing of animation business to India and overseas expansion of the local companies will fuel further growth. The industry is expected to reach the $ 20 billion mark by 2012.

Ronnie Screwvala, chief executive officer, UTV Software Communications, said, "Unfortunately, all finance ministers so far have looked at the M&E industry as a frivolous one - only worthy of a movie quote to get home a point." in association with the Indian Broadcast Federation (IBF) has made an formal appeal to the Finance Ministry to extend a number of incentives and concessions to the M&E industry, which have been given to the IT Industry in past.

"The Central government has amended the TRAI Act in 2004, whereby, the scope of the definition 'Telecommunication Services' has been extended to include the 'Broadcasting and Cable Services'. Therefore, for all practical purposes, Broadcasting and Cable Services are now Telecommunication Services, and the same benefits shall be given there off." says Sheetal Patel, editor,

Customs duty, including counter veiling duty and cess, for broadcast equipment stands at a whooping 36.64 per cent, whereas, it is only 21.32 per cent for computers and as small as just 4 per cent for cell phones.

The M&E industry has been lobbying hard for set-top boxes and modems, which are used for cable, DTH and IPTV and other broadcast equipment, to be at par with duties that IT equipment enjoys.

The M&E industry is also keen on the exemption of the VAT on copyrights. It is learnt that there is no way the VAT can be passed on to the ultimate customer. Also, copyrights cannot be treated as goods and simultaneously be subject to TDS (tax deducted at source) norms.

That apart, also comes the grouse that the industry has on the levy of entertainment tax. While entertainment tax is a state subject and VAT is a central subject, the M&E industry is bearing the brunt of double taxation.

Also, there is no coherent act by the state governments on entertainment tax. For example, Delhi has withdrawn it while other states have not, the industry demands either scrapping of the entertainment tax or exemption from VAT, said Screwvala.

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