Now, TV industry set to face TDS on sale of air-time slots

Written by Ashish Sinha | New Delhi | Updated: Mar 30 2011, 15:10pm hrs
Already burdened with multiple taxation, the television industry has more bad news coming. The central tax authorities are set to deduct TDS (tax deducted at source) or tax deducted at source on the sale of on-air time slots. The TDS will also apply on the creators of sponsored shows on cable and satellite channels from the fiscal beginning April 1. Currently, there is no provision of TDS on the advertising revenue generated on television.

Experts said the move will put extra burden on media buying agencies from next month as they buy the on-air time slots on various channels on behalf of advertisers. Even broadcasters will have to maintain the details of their inventory sold to the advertisers including the details of TDS deducted on the transactions.

The Central Board of Direct Taxes (CBDT) has already incorporated these changes proposed by the Comptroller and Auditor General (CAG) of India in the direct taxes code. Despite special film circles being created in four cities with a view to assess those involved in the film- and TV-related activities, several instances have come to light were the assesses were being assessed in other units or failed to file returns... The aim of the exercise is to broaden the tax net on an industry which is involved in significant economic activities, a government official said.

Another important reason for bringing on-air time slots under the tax net is the huge outward remittance of revenue by foreign broadcasters that includes both advertising and subscription revenues. More than R1,200 crore is locked in disputes with various judicial fora as a result of non-payment of taxes by foreign broadcasters who have disputed their subscription earnings as royalty. The authorities have to take appropriate measures to check such large media firms, an official said. The CAG in its latest report has given the example of Star TV and MTV, where over R883 crore is held up in litigation.

According to people aware of the matter, the proposal is to charge TDS at 10% on the advertiser/media agencies buying slots on television, which would effectively translate into collections of R1,000 crore-plus in taxes from the next fiscal, as television accounts for 40% of the overall R26,000 crore advertising industry.

The central tax authorities will also charge TDS on the sale of distribution rights and on the proceeds from exhibition of films. The distribution of films across television networks has become a big business, valued at over R500 crore, whereby film producers sell the satellite rights to various channels for different durations of screening on television. Experts said this would translate into another R1,000 crore-plus in tax collections for the government. TDS provisions need to be broadened to cover activities like distribution of rights of films and sharing of proceeds from film exhibition to avoid tax evasion and also to broaden the tax base, the official said. Apart from these steps, disclosure of PAN number will be mandatory for anyone who gets paid over R50,000 while working in either films or the television industry. The onus for mandating this will fall on the producers of films and television content. CBDT will suitably amend the norms to include PAN in Form 52A.

Form 52A pertains to the statement that needs to be furnished to the assessing officer under section 285B of the Income Tax Act, 1961, in respect of production of films. This will now include television production too, sources said.