Budget 2008: IBF wants no customss duty on STBs

[~Hami~]

Budget 2008: IBF wants no customs duty on STBsFeb 21, 2008Indiantelevision.com Team NEW DELHI: The Indian Broadcasting Foundation, the largest body of television channels in the country, has urged the Finance Ministry to exempt CVD, cess charges and additional duty on set-top boxes (STBs) for the next 10 years. This will go to STBs being available at reasonable prices and help boost digitalisation of cable TV services. In a pre-budget memorandum presented to the Revenue Secretary and other senior officials in the Ministry recently, the IBF has also demanded that the concessions given to the IT industry should be extended to broadcasting, particularly in view of the convergence of technologies. For example, as of now, customs duty, CVD, and cess for broadcast equipment put together is 36.64 per cent whereas it is only 21.32 per cent for computers and 4 per cent for cell phones. The Foundation says that it is the most heavily and unfairly taxed Industry. Apart from service tax, states impose very high, even up to 35 to 40 per cent entertainment tax as also sales tax, stamp duty etc. The base of the fringe benefit tax for the broadcasting industry has been kept at 20 per cent whereas the base for six industries including computer software industry is only 5 per cent. The IBF says that the total service tax at 12.36 per cent on the total television media advertising revenue of Rs 74 billion works out to Rs 9.15 billion. Of this, the service tax liability of Doordarshan is Rs 1.01 billion and that of other channels is Rs 8.14 billion. Of the total ad revenue, the share of Doordarshan is Rs 8.18 billion and private channels is Rs 65.82 billion. The customs duty should be zero to make STBs affordable to consumers and no excise duty to encourage indigenous production of STBs. The government should exempt the broadcasting industry from service tax as in the case of print media, the IBF says. The government had in March 2005 granted exemption to the service providers (small cable operators) whose aggregate value of taxable service for a financial year does not exceed Rs 400,000. There was need for a clarification that the exemption granted is only in respect of service tax payable on services provided and does not extend to service tax charged on services procured by cable operators. Cable operators, thus, are liable to pay service tax charged by broadcasters and multi-system operators (MSOs). In this regard, the service tax authorities may be asked to launch periodic campaigns to ensure that all last mile cable operators are registered and display their registration certificates prominently. In view of the fact that broadcasting is included in Entry No. 31 and is being treated as a “Service” under Entry No. 92 C of List I of Seventh Schedule of the Constitution, the state and union territory governments may be directed not to levy entertainment tax, sales tax, etc. on the broadcasting industry inclusive of distribution services. There was need to expand the definition of Industrial Undertaking under Section 72A of the Income Tax Act, 1961 to include Electronic Media, that is, TV Broadcasting. In order to enable cable operators invest in infrastructure for achieving time bound digitalisation, a “National Fund” may be created to provide soft loans etc. Television industry is the electronic version of the print media providing information, entertainment and education to the citizens of India. Though service tax is levied on Broadcasting media, print media is not attracting service tax even though it enjoys a larger share of advertising revenue. According to the IBF, The total estimated advertisement revenue for 2006-07 was Rs 164 billion of which 55 per cent was generated by the print media (Rs 90 billion) and 45 per cent by TV channels (Rs 74 billion). The Ad spend to GDP ratio for India is one of the lowest at 0.34 per cent. It is 1.3 per cent for USA, 1.0 per cent for Australia and even neighbouring countries in South East Asia like Malaysia, South Korea, Singapore etc enjoy a high ratio of 0.8 per cent to 1 per cent. Without government’s support like service tax holiday on advertisement revenue, the potential cannot be exploited to the desired extent. Service tax pulls down consumption and hence economic growth. Lower consumption means lower overall tax revenues. As a result of the service tax, even the public service broadcaster Prasar Bharati will have to increasingly depend on Government grants while private TV channels (particularly news channels) will have a hard fight to survive, the IBF points out. At the outset, the IBF points out that there are 122 million Television homes in India and more than 71 million homes are connected to Cable & Satellite TV and these are increasing rapidly. The industry produces approximately 6,00,000 hours of original programming annually for more than 300 TV Channels making it one of the biggest in the world. There are over 56 million viewers of Indian television programming in neighbouring countries and overseas, creating a positive international image of India unlike any other media.