Digitisation will fetch govt Rs.5k cr in tax annually

Nov 19 2012, 01:44 IST
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SummaryFor the Centre, which is staring at a piling revenue deficit, the conversion of over 90 million analogue cable homes into digital addressable system will generate an annual gain of over R5,000 crore from taxes — a 10-fold increase from what it was getting earlier.

For the Centre, which is staring at a piling revenue deficit, the conversion of over 90 million analogue cable homes into digital addressable system (DAS) will generate an annual gain of over R5,000 crore from taxes — a 10-fold increase from what it was getting earlier. 

According to a senior revenue department official, the finance ministry expects up to 40% of this amount to come in the current fiscal alone.

This is significant because so far the government has been getting an annual tax revenue of only R500-600 crore from this sector whereas the cable industry revenues have been to the tune of R18,000-R20,000 crore in the last three years.

The low-tax collections were primarily due to the under-declaration of cable subscriber base and the resultant income generated from the collection of monthly subscription charges from cable homes. Also, there have been other leakages in revenue stream in the business chain due to "off-record" business deals between local operators-multi-system operators (large cable companies) and the broadcasters. 

“The I&B ministry has told us that digitization of cable will lead to enhanced collections in taxes – service tax, income tax, entertainment tax, VAT among others. We hope to get a chunk of it within the current financial year,” a senior finance ministry official told FE. The Centre expects to get R5,000 crore-plus of tax revenue from the sector from 2013-14, the official said.

The average rate of taxation on the cable sector is pegged at around 35% (service tax, entertainment tax, income tax, VAT, CVD, customs duty etc). At this rate, the Centre should get at least R7,000 crore in taxes, which it doesn’t, said a senior official. The digitisation plan is aimed at fixing the problem apart from providing consumers access to high-quality cable experience, he said. 

As per an internal note sent to the finance ministry, the central government accrues an annual loss of nearly R1,800 crore due to under-declaration in the analogue cable regime. Under a pan-India digitized cable regime (where every consumer is accounted for), the government will stand to gain nearly R3,000 crore in taxes with almost R1,000 crore coming from service tax, R1,400 crore from income tax and balance from other taxes. Similarly, nearly R2,000 crore in taxes will be contributed by the 45-million plus direct-to-home subscriber base.

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