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M&E industry seeks conducive tax environment
MUMBAI: The media and entertainment (M&E) industry is swamped with issues such as double taxation, ambiguity on certain rules, entertainment tax, etc. Though the rollout of the Goods & Services Tax (GST) is expected to simplify the tax regime by combining a multitude of taxes, there are still multiple areas of concern.
A session on ‘An Enabling Tax Regime for the M&E Sector’ at FICCI Frames 2015 discussed the key issues with the tax structure.
BBSR & Co partner and head of tax M&E sector Himanshu Parekh said that there needs to be more clarity on withholding tax in acquisition of TV programs; placement / carriage fee; agency commission and transponder charges.
“There is a lack of clarity on the rate of Tax Deduction at Source (TDS) for payments made by the broadcasters to acquire television content or payments made to cable operators as carriage fee. Broadcasters feel that TDS should be 2 per cent, while the tax authorities levy 10 per cent,” Parekh said.
Other issues such as deductibility of cost of content, dual levy of service tax and VAT on content, carry forward of loss on amalgamation, and taxation of foreign telecasting companies leave no scope for the industry to flourish.
Viacom 18 CFO Narayan Prabhat Ranjan pointed out that the sector was being unnecessarily burdened with additional taxes such as service tax and VAT on the same product. He added that most of the litigation in the sector was due to complexity and ambiguity in regulations. Hence, the government should look at these policies and regulations at the earliest to enable the M&E industry to sustain itself.
Ranjan also said that the benefit of the carrying forward of losses should be extended to the industry. “To my mind, this is what government should look at. It will help consolidation in the long term.”
Parekh said that the film industry is incurring loss of service tax in respect of theatrical revenues. There are ambiguities surrounding Rule 9A/9B—if it extends to non-theatrical rights, if it is discretionary or mandatory, if it overrides other provisions of the IT, Act and more.
Parekh explained that the film industry has been stuck with high and different entertainment tax rates in different states. “This varies between 15 and 50 per cent from state to state.”
Disney India CFO Sujit Vaidya added that the industry needs streamlining of tax structure. “The evolution of the industry and that of the tax structure did not happen at the same pace, leading to so many tax litigations. Owing to the multitude of taxes, out of every Rs 100 spent by a customer, a studio gets less than Rs 50.”
He hopes that GST will subsume all these taxes and help the industry.
He added that piracy was another key challenge for the industry besides tax discrepancy. To combat piracy, he urged the government to provide incentives to theatre owners to penetrate rural and Tier II and III cities by increasing the number of screens.
On the AOP part, Vaidya added that film co-productions do not have clarity on the taxes.
For the cable and DTH sector, Parekh said that the withholding tax on discount on sale of set-top boxes (STBs) and recharge coupon vouchers (RCV), double levy of tax on installation and activation charges, and double levy of tax on RCV are the key concerns.
Tata Sky CFO G Sambasivan said that unlike film industry, which gets Rs 50 out of Rs 100, DTH gets only Rs 30. “Out of this Rs 30, I have to run operations, and give returns to my shareholders. We are not talking about thriving, we are asking about surviving here. If the government wants us to survive, they have to rationalise the taxes,” Sambasivan added.
He added that in the past 11 months, the company has received as many as 1,230 tax notices from the authorities. “That’s over three letters per day. We end up spending close to a week replying to each of them. This is a waste of time,” he regretted.
Hathway Cable & Datacom deputy CFO Vineet Garg added that the government should facilitate the industry by easing taxation compliance and provide tax rebate. He also said that tax litigations have been on the rise owing to the complex tax structure that needs to be corrected.
“All this is taking a lot of management time. We don’t have enough time now to focus on business. We have to spend most of our time and energy on compliances. The government should help and simplify this piece,” he added.