MUMBAI: The bleeding TV distribution sector finally has something to cheer about. The GST Council, the key decision-making body for Goods and Services Tax (GST) implementation, has fixed the GST rate at 18% for cable TV and direct-to-home (DTH) services.
The move will bring some relief to cable and DTH companies as well as consumers as it will lead to tax savings for them, thus lowering the prices of these services.
Currently, cable and DTH companies have to pay multiple taxes like service and entertainment tax. DTH companies have an additional burden in the form of licence fees.
According to the Ministry of Finance, the rate of entertainment tax on cable TV and DTH levied by states is in the range of 10–30%. The service tax levied by the central government is at 15%. DTH companies are required to pay 10% of their gross revenue as licence fee to the government.
As against this, the rate of GST approved by GST Council on these services is 18%.
Furthermore, service providers will be eligible for full Input Tax Credits (ITC) of GST paid in respect of inputs and input services.
Taxes on entertainment and amusements covered by the erstwhile Entry 62 of State List of the Constitution have been subsumed under GST except to the extent of taxes on entertainment and amusements levied by a panchayat or a municipality.
The GST Council has fixed 28% GST rate on cinema theatres. Justifying the move, the finance ministry said that the entertainment tax rates on theatres/cinema halls is as high as 100% in some of the states.
The rate of GST approved by the GST Council on access to circus, theatre, Indian classical dance including folk dance and drama is 18% ad valorem. Further, the GST Council has approved an exemption up to a consideration for admission of Rs 250 per person. These services currently attract entertainment tax levied by the states.
The ministry said that entertainment services will suffer a lower tax incidence under the GST regime.
In addition to the benefit of lower headline rates of GST, the service providers will be eligible for full input tax credits (ITC) of GST paid in respect of inputs and input services.
Presently, such service providers are not eligible to avail of input credits in respect of VAT paid on domestically procured capital goods and inputs or of special additional duty (SAD) paid on imported capital goods and inputs.
Thus, while GST is a value-added tax, entertainment tax, presently levied by the states, is like a turnover tax.
GST is a destination-based tax which will subsume most of the central and state taxes into a single tax, and by allowing a set-off of prior-stage taxes for the transactions across the entire value chain, it would mitigate the ill-effects of cascading, and improve competitiveness and liquidity of businesses.
GST has five rate slabs for goods and services. These are 5% for mass consumption items, 12% for processed foods, 18% for FMCG and electronic goods, 28% for white goods and cars, and 28% plus cess for luxury cars, tobacco, and aerated drinks.