M&E sector looks forward to tax relief in FM’s ‘never before’ Union Budget

India Inc is looking forward to a Union Budget like "never before", as promised by Finance Minister Nirmala Sitharaman. Most from the media or allied industries is looking at a Budget that boosts consumer sentiments, thereby hoping for better ad bills as the market starts to open up after a long financial lull induced by the pandemic.

According to experts, growth in demand matched with manufacturing would create a robust ecosystem which will jumpstart the economy. In the process, the entire broadcast industry would be benefitted as economic growth is always reflected in enhanced advertising and the growth in advertising would regenerate the TV broadcast & digital broadcast industry as along with the rest of the economy.

Ashish Bhasin, CEO, APAC and Chairman, India, Dentsu said, “I am certain that the growth in India will come from rural areas and not just from urban pockets or society’s privileged sections. I would like to see more money directly flowing into consumers’ pockets through tax incentives or other means so that they have more money to spend. Also, clients need to be incentivized to spend more on advertising since that would create a demand and spur the economy.”

“When it comes to the taxation policies that advertising agencies are liable for, I believe that agencies don't mind the taxes. However, the taxation process is encumbered by complexities. It wastes too much time. The rationalization of taxes, combined with smoothened transactions by a more simplified process will go a long way in benefitting our industry. I am hoping that the upcoming Budget would be a growth-oriented one, which indirectly helps advertising and we know that advertising generates demand,” he further said.

“2020 has been a year “off script” for the M&E sector,” said Himanshu Parekh, Partner, and Head, Corporate and International Tax, KPMG in India.

"One of the major expectations of the M&E sector revolves around Equalisation Levy (EL). The way the EL provisions are drafted, there are several interpretational issues and ambiguities surrounding them. It would do well for the government to demystify these issues in the Budget. Another ask of the industry is to reduce the rate of TDS on domestic payment towards non-theatrical rights to 2% on par with the TDS rate in respect of the sale, distribution, and exhibition of cinematographic films,” he said.

“Further, the tax law should be suitably amended to allow TDS credit reflected in Form 26AS, irrespective of the year in which the corresponding income is offered to tax. In case of amalgamation of companies, provisions should be amended to allow the benefit of carry forward of losses to the companies involved in the M&E sector as well. On the GST front, allowing input tax credit on certain expenses relating to the production of content and on payment of advance for the acquisition of rights would go a long way to improve the working capital position, especially during the ongoing pandemic. Suitable amendments to address the aforesaid issues would act as a much-needed vaccine for the M&E sector,” Parekh added.

Taxes are a common concern for the media and advertising domain like most other sectors.

Harikrishnan Pillai, CEO and co-founder, TheSmallBigIdea says, "On the top of the list will be, ‘tax relaxations’. Running along tax relaxations will be the demand for ‘reduction on import duties for capital goods’ used for production or transmission of content. ‘A more amicable FDI regime’ will feature in the list too, as a fresh infusion of foreign money will help make up for the tough 2020. The government should proactively also look at ‘incentivizing international films or content creators’ to shoot content in India, in an attempt to assist employement and increase revenues generated from assets like studios, especially for animation content. Considering the creative affinity and technology talent available in India, it can poise itself to be the ‘post-production hub of the world’. Tax reliefs for revenue such made can attract global filmmakers to create in or outsource work to India.”

“The broadcast industry – both TV & Digital-- would benefit immensely if the government could consider a reduction in GST applicable on advertising. Currently it stands at 18%. Also, it would be helpful if the regulation is amended to allow input credit on hiring of motor vehicle for business purposes and food and beverages for in-house production,” said Ritu Dhawan, Managing Director, India TV.

Enabling and encouraging consolidation in the broadcasting industry by amending section 72A of the Income Tax Act is also something broadcasters are looking forward to.

“Also amending the Income Tax Act suitably by not considering hiring of transponder services as royalty, as the payment to foreign transponder companies on net of tax basis leads to 10% extra cost burden on Indian service recipients. Cable distribution services and Direct to Home services have also demanded a reduction in GST applicable from the existing rate of 18%. Given the massive hit the broadcast sector has undertaken due to the pandemic, a reduction in the prevailing GST rate would be a welcome step,” Dhawan added.

Radio players have similar expectations from Budget 2021.

“The economy saw a sharp decline due the pandemic last year. As we continue on the path to recovery, experts predict that in the coming year, the economy will see an upswing. Additionally, indications point at the fact that there will be significant government investments to help revive the economy, and in turn, this will help boost consumer demand. This should give an impetus to the advertisers to up their spending across media in the coming year.  We are hopeful that the Budget will be favourable for the M&E industry on the whole and for radio in particular. We hope issues of high license fee and FDI regime will be addressed for boosting long-term growth of the radio industry,” said Rahul Kumar Shaw, CEO, TV and Radio, TV Today Network.

For print, the major concern is around duties on newsprint prices. Last year, the customs duty on import of newsprint was reduced to 5% from 10% announced in Budget 2019.

Already hit by circulation troubles, increased cost and dwindling ad revenues, the print fraternity expects waiving off of customs duty on newsprint.

Overall, the expectation is to push customers towards buying which would directly lead to better market sentiments and more spends on advertisements.

“2020 has been a difficult year for businesses across the spectrum. What, therefore, is required from the Budget is a boost to the consumer sentiment. We are definitely wanting tax rates to not go up further. Additionally, it will be great if the businesses start getting some incentives for advertising and CSR activities. As an industry, we had appealed at the beginning of the pandemic too to give us some relief to businesses on allowability of advertising spends as advertising eventually helps to boost the economy. On a larger perspective, there should be additional support for MSMEs and start-ups in the Budget, which is the backbone of the Indian economy,” said Anand Bhadkamkar, CEO-India, dentsu.