This will help realise the Digital India vision, with easier financing for distributors and set-top box manufacturers.
As an economy develops, its tax policy becomes more stable; policy-making more transparent and national priorities stickier. All this calls for a predictable Budget that needs to be viewed in the context of its preceding and future versions. This time around, the finance minister would do well to consider two guiding principles while drafting the final Budget document.
The first pertains to innovation. This government has done away with several ‘traditions’ of the past. Be it the creation of the NITI Aayog or the coordinated use of social media, it has set new precedents. The same innovative approach needs to be applied to this Budget. I often wonder how much of the televised, technical and verbose Budget speech the layperson understands. What if the presentation style is engaging, multi-lingual, audio-visual with infographics? Why not address the impact made by the allocations and projects announced in the previous year’s Budget?
The second pertains to continuity. The finance minister must ensure that each announcement is in line with the broader vision of the government for each sector. Given that the GST is an eventuality, the government must articulate how the current measures will add up as we transition towards a GST regime. This will lead to lesser furore around next year’s Budget.
On a more specific note, there are some steps that can help level the playing field for the media and entertainment sector as its shifts to a higher growth orbit.
Grant of infrastructure status to the media and entertainment industry: This will provide an impetus to digitisation by easier financing norms for distributors and set-top box makers.
Carry-forward of tax losses in case of merger/amalgamation: This will encourage consolidation in a fragmented sector, thereby leading to parity with telecom and software sectors.
Harmonisation of withholding tax rate to 10% instead of 25% in case of payment of royalty/FTS to non-residents: This will reduce the cost of business as these taxes are borne by broadcasters when they make payments to non-residents, leading to an additional financial burden of 37%. It will also lead to parity with select tax treaties signed by India.
Change in the Served from India Scheme (SFIS) to allow SFIS credits to be netted off against service tax: This is consistent with Make-in-India. It will lead to parity of services with manufacturing when it comes to incentives and subsidies under India’s foreign trade regime.
Not treating transponder hire charges as royalty payments: Such arrangements are not technology transfers and should not be taxed accordingly.
While last year’s announcement of a National Institute of Animation was welcome, the finance minister must also follow up on his previous announcement of setting up a nationwide incubator and accelerator programme. Innovation is the bedrock of both our industry and Digital India.
The management of a national economy is akin to a marathon than a sprint. The Budget is just the February lap of the marathon, with many more laps still to go.
The author is chairman, CII National Committee on Media & Entertainment, and Group CEO, Viacom18 Media Pvt Ltd