Expectations soar for media and entertainment industry as Budget day approaches
Aspirations mount for the R91,800 crore-plus media and entertainment sector as Budget day approaches and stakeholders clamour for that crucial push in cable digitisation, de-regulation in pricing of channels, tax waivers and implementation of foreign direct investment norms. As a run-up to Budget 2015, the Union Cabinet recently approved the partial auction of radio frequencies and migration of private FM radio licences in phase 2 and 3 in 69 cities for 135 channels. While the radio industry is buoyant over this development, there are further regulatory changes that they are pushing for. Apurva Purohit, chief executive at Radio City 91.1 FM—a station recently acquired by the Jagran Prakashan Group, said that the FM industry is on the cusp of expansion and there is huge anticipation riding on this Budget.
“In sheer volume terms, we are going to witness a geographical expansion of FM in the third phase. The government should take measures to give fillip to this by expediting the auctions on priority, supporting the expansion by raising the FDI to a minimum of 49% and incentivising by providing a tax holiday to radio players investing in non-viable markets. This, coupled with the easing of regulations, shall create fresh excitement in the medium and therefore enable growth,” said Purohit.
Similarly Tarun Katial, chief executive of Reliance Broadcast Network which runs Big FM 92.7 radio stations and television channels under the brand name Big Magic, said that he looks forward to clarity in the radio and broadcast landscape in terms of regulation, uniformity and relief from taxes. “Advertisements on free to air mediums such as radio should be treated differently and lower or nil service tax should apply for the same, aligning with the print and out of home industries. Also, FDI in non-news radio operations needs to be brought at par with television broadcasting.” He also said that customs duty on radio and television broadcast equipment should be relaxed. We look forward to necessary fiscal incentives in the form removal or reduction of multiple taxes and levies and regulations which ensure transparency and power of choice to the end customer.”
Earlier in 2014, the Narendra Modi led government extended the deadline for its digitisation drive till end December 2015 to give domestic set top box (STB) manufacturers more time to meet the demand in the market. Stakeholders in this segment complain of double taxation and of high customs duty on equipment. Harit Nagpal, chief executive and managing director of Tata Sky, says that the direct to home (DTH) sector pays 34% of their gross revenue as taxes. “We are the only sector that pays entertainment tax to the states and service tax to the Centre in addition to the licence fee. It has been our long standing request to set off entertainment tax against service tax and we hope that it will be acknowledged in this Budget.”
Ashok Mansukhani, whole time director at Hinduja Ventures Ltd, says that for digital cable, the basic custom duty on set top boxes as well digital head end equipment should be reduced to zero for the next five years to give a boost to conversion of the broadcast distribution network to digitally addressable systems. This, he says, has also been recommended by the Telecom Regulatory Authority of India (Trai). “The high subsidies offered by multisystem operators and DTH operators will come down, thereby allowing focus on other capital expenditure (capex) requirements.” He adds, “Cable services are categorised as “entertainment” and are amenable for entertainment tax in state, and also labeled as “service” and amenable to service tax from the Centre rendering these services costlier for consumers. All other entertainment activities such as movies in a cinema hall, theatre performance, music shows, etc., are not categorised as “service” and only entertainment tax is levied.”
Sudhanshu Vats, group chief executive at Viacom 18 Media, said that the finance minister should allocate resources for setting up adequate educational institutes and vocational training centres in order to build the talent pipeline in the media and entertainment sector. Last year’s announcement of a National Institute of Animation was a move in this direction. The finance minister must also follow up on the previous year’s announcement of setting up a nationwide incubator programme, he asserted.
Vats also suggested certain steps for a level playing field in the sector. The grant of “infrastructure status” for the media and entertainment industry is one. “This will provide an impetus to digitisation and will lead to easier financing norms for distributors and set top box manufacturers.” Vats also suggested a “carry forward of tax losses” in case of mergers and amalgamation. “This will encourage consolidation in a fragmented sector thereby leading to parity with telecom and software sectors.”
Sundeep Malhotra, founder and chief executive at HomeShop18, said that digital commerce in a short span of time has evolved into a multi-billion dollar sector. It’s impetus on the growth of allied industries such as manufacturing, logistics and supplies, makes it a significant contributor to the Indian economy and therefore there should be an adequate regulatory framework to sustain its growth. “The dynamic and rapid evolution of digital commerce demands a national e-commerce policy and a regulatory framework that will accelerate the smooth growth of the industry. Removal of barriers in FDI in retail will be a breakthrough towards economic liberalism in this sector,” he said. Another important area that the government should look to fast track is bringing consistency and simplicity in the tax regime, particularly related to the uniform Goods & Services Tax (GST), he said. “Introduction of GST would be favourable to the growth of the e-commerce sector as it will rationalise supply chain and create common stocking points, thereby offering better value for all stakeholders, with benefits reaching even the tier three and four cities of the country.”
** “The government should expedite phase 3 auctions, raise FDI to a minimum of 49% and provide a tax holiday to radio players investing in non-viable markets.” Apurva Purohit, CEO, Radio City 91.1 FM
** “Grant of infrastructure status will provide an impetus to digitisation and lead to easier financing norms for distributors and set top box manufacturers.” Sudhanshu Vats, Group CEO, Viacom 18 Media
** We are the only sector that pays entertainment tax to the states and service tax to the Centre in addition to the licence fee.” Harit Nagpal, CEO & MD, Tata Sky
** Ads on free to air mediums such as radio should be treated differently and lower or nil service tax should apply, aligning it with the print and out of home industries.” Tarun Katial, CEO, Reliance Broadcast Network