The implementation of Goods & Services Tax (GST) has ushered in a new era for marketers and advertisers. Many believe that the new tax regime, which has revised tax rates across industries, will boost ad spends in the long run as there will be rise in consumption.
With the reduction of tax slab in Auto, FMCG and Consumer Durables under GST, these sectors will be able to advertise more in the same budget as cost of advertising will reduce to a large extent. This will however not be the case immediately. In the short term, the ad industry is slated to witness some challenging times too.
Stating that the current GST regime may bring in temporary supply imbalance, Sunil Lulla - Chairman and Managing Director, GREY Group India, said, "While on the face of it GST is at 18% and Service Tax was at 15%, these are set off taxes paid as input and output. In essence it won't affect the outlay paid to media nor its agencies nor the creative agencies. There is likely to be temporary disruption with these changes, to which extent there will be a supply imbalance more than any impact on demand."
For Avinash Pandey, COO, ABP News Network, with GST there will be a rise in consumption that will strengthen advertisers spends leading to an overall increase in revenue. ‘’The levy of GST will be marred with minor problems but that will be a matter of days. Every sector has different challenges in GST however every manufacturer, service provider and trader will be impacted positively. Owing to GST there will be a rise in consumption that will strengthen advertisers spends leading to an overall increase in revenue.’’
GST will definitely have its own share of complexities for businesses operating in multi-states, as there will be Central and State GST. Moreover, online matching of sales and purchases filed by the clients and vendors will make it more complex operationally. However, the benefits will outweigh the disadvantages
On an industry level, GST has only brought a positive impact to agencies says Divya Radhakrishnan, MD, Helios Media. Under GST she is looking forward to the three per cent incremental from the advertising business while from the content business it may be a little more, given that service tax and VAT were calculated separately and under GST the taxes have been normalised.
“I see a bigger spending from brands starting October, with Diwali and going on until December,” said Rajiv Dingra, Founder & CEO WATConsult. Dingra also expects this festive season to be much better than last year’s which was massively impacted by demonetisation. There may be some short-term glitches in accounting but industry insiders expect that to settle down in the next three months.
Advertising agencies like Helios Media are having a smooth run under the GST regime. Radhakrishnan said that her company faced no hassles under the new regime. While Radhakrishnan may have no complaints, not all agencies have had it as smooth. Swamped with GST work, clients seem to have slipped up when it came to sharing their new GST numbers with agencies. Industry insiders feel that for the GST implementation to be hassle-free, cooperation among vendors and clients has to be the prime focus area.
Speaking about how GST has impacted the day-to-day functions of the company, Dingra said, “From what we understand, the option to take credit back on service tax, if the invoice is cancelled, is a complicated process as of now.” Dingra said that while the implementation of GST will be accompanied by short-term hassles, it should not deter overall sentiment. He said that for most large and established organisations that have really good systems and processes, everything related to GST should be sorted within this month itself. He believes that for those who will take more time to settle down, they may face more issues and losses even.