20 Sep 2017
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DTH ops fear ET from local bodies could surface, take away Rs 700-cr GST advantage

MUMBAI: India’s direct-to-home (DTH) companies, which paid Rs 1,300 crore as entertainment tax in FY17, are expecting the burden to lighten after the Goods and Services Tax (GST) comes into force.

The DTH sector could save Rs 700 crore in lieu of tax, according to preliminary market estimates. While the GST rate has been fixed at 18% for the DTH and cable TV services, the current service tax and entertainment tax together work out to anywhere between 21% and 24% on average, depending on the geographical distribution of the subscriber base of the distribution platform operator (DPO). The GST will subsume the service tax (15%) and entertainment tax (varies from state to state).

The six private DTH companies had a combined turnover of around Rs 17,000 crore in FY17. Dish TV reported revenues of Rs 3,014.4 crore, Videocon d2h Rs 3,072 crore and Airtel Digital TV Rs 3,430.6 crore. Tata Sky and Sun Direct are not listed companies while Reliance Digital TV is the DTH arm of Anil Ambani-led Reliance Communications.

DTH companies, however, fear a spoke in the wheel could appear in the form of local bodies like municipalities coming out with entertainment tax. Even if one state starts empowering their municipalities to levy additional taxes, other states may be encouraged to follow.

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“We are hoping to see an upside as the GST will lower taxes for us. But entertainment tax should not come in through local bodies. Then the whole purpose of GST would be lost. We will have an additional burden and it will spoil our business even as ARPU (average revenue per user) is growing at a slow pace,” said a senior executive of a DTH company.

Another executive said that DTH will find it hard to implement the logistics if local bodies start imposing entertainment tax. “Earlier, we had to deal with states. We don’t want to get into a situation where we will have to deal with local bodies,” he said.

The executive noted that DTH companies had stabilised entertainment tax at the state level only in the last few years. “The system takes time to stabilise. It will be a nightmare if we have to do it at the local body level when we had geared up to develop a system for the implementation of GST across our value chain,” he added.

DTH companies will also find it hard to collate the data on municipality basis as they have structured it according to pin code, the executive of a top-tier DTH company said. “It will be difficult to compile the data and pay entertainment tax on municipality basis,” he added.