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FICCI Frames 2014: Taxation remains a sore issue for media

Panel comes to the conclusion that there is a need for clarity in tax laws and a removal of dual taxation on same service

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FICCI Frames 2014: Taxation remains a sore issue for media

FICCI Frames 2014: Taxation remains a sore issue for media

Panel comes to the conclusion that there is a need for clarity in tax laws and a removal of dual taxation on same service

Sohini Sen | Mumbai| March 18, 2014

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The subject of taxation in the media and entertainment industry came under scrutiny on the final day, Friday, March 14, of FICCI Frames 2014. Attended by a large audience, the session saw a host of topics being discussed and debated by the media experts.

The panel consisted of Nitin Nadkarni, CFO, Multi Screen Media; Narayan Prabhat Ranjan, CFO, Viacom18 Media; Asheesh Chatterjee, CFO, Reliance Broadcast Network; Sambasivan G, CFO, Tata Sky and L Suresh, Vice-president, Film Federation of India. Anchoring the session was Himanshu Parekh, Tax Partner, BBSR & Co.

There is a realisation that the tax landscape in India is quite complex and challenging. While it is true that there is a commercial aspect to it, it is equally true that taxation has become very much a part of boardroom discussions. However, the multifarious taxes and their complexities have led to various controversies in the media industry.

The discussion started with a slide show on taxation and how it has affected the film, broadcast, radio and DTH industry. Parekh explained the complexities of Rule 9A and 9B and the ambiguities around it. The industry, according to him, is still confused about whether it applies only to theatrical rights or also to non-theatrical rights; whether it is mandatory in nature or discretionary; and lastly, whether it overrides the other provisions of the IT Act. He went on to discuss the tax impact on the broadcasting industry with the acquisition of TV programmes, placement carriage fees, agency commissions and transponder charges, etc. In the radio and DTH industry, the double levy of tax and deductibility of licence fees has certain effects as well which was also explained.

Narayan Ranjan spoke about the key tax issues and gave suggestions for solving them. The point he tried to make was that when we talk about the industry and service sector, 60 per cent of the GDP is from the service sector. And this has a bearing on the way we understand taxes. Unless this mindset changes, the situation will not change, he said..

Nitin Nadkarni distinguished between the tax landscape in India and Singapore. He felt that the Singaporean tax authorities are more mature in their approach to tax as people can seek clarification on a no-value basis. This doesn't happen in India, where the lower levels are completely revenue oriented.

“The relief in India comes only at an appellate stage and that also takes too long to get processed. Therefore, foreign investors are scared to enter in India. The mindset needs to change and we need to address that,” Nadkarni said.

According to Suresh, in the olden days entertainment tax was as much as 150 per cent in some states, but that has come down now. Once the CST comes into force, everything will come to 12 per cent.

Sambasivan pointed out that India had the highest tax rates for an industry which is supposed to be completely digitised. “All of us are cash negative and we won't become cash positive in the coming few years,” he pointed out.

Sambasivan further said that if the industry is expected to grow, customs should gradually come down. However, as seen in India, it has doubled which leads to tension in the industry, not to mention a lot of forex losses.

According to Chatterjee, within media value chain there has to be a parity, which essentially means that either a “flattish structure should prevail or nothing at all should be there”. Since a large part of cost base for radio has no service tax at all, service tax going away will directly impact radio. He felt there is a disparity since on the one hand “we are going towards a transparent tax regime, and on the other, we need a lower withholding tax regime”.

Ranjan closed the discussion saying that “till there is a difference in the mindset of the government, I am not going to be hopeful about a change in the situation.” All the panelists agreed that the tax environment has to improve, and tax authorities being more supportive. There is also a need for clarity in tax laws and avoidance of a multiplicity of taxes on the same service.

Sohini.Sen@BestMediaInfo.com

Info@BestMediaInfo.com

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