The Federation of Indian Chambers of Commerce and Industry (FICCI) is against the tax on broadcasting services. It has said that the five per cent service tax on broadcasting services would have a “serious and retrograde impact” on the entertainment and FMCG industries in the country.
The chamber has written to the ministry of finance saying that the output of the entertainment goes through several stages and it is unfair to subject it to a service tax at every level.
According to FICCI, the industry in the country is in a nascent stage as the investment in advertising and brand building is one of the lowest in the world, both in terms of per capita spending and as a percentage of the GDP (gross domestic product).
“In India, the advertising expenditure on electronic media such as television, radio and internet is approximately Rs 3500 crores annually. By and large, advertising budgets of the corporates and others are broadly inflexible and an additional levy of five per cent would lead to reduction in media revenues of electronic media as the attempt would be to absorb the tax within the existing budgets,” the release says.
The government had, in 1996, notified imposition of service tax on advertising revenues, but later an amendment was made and the levy was made applicable only to the value of services provided by the ad agency.
FICCI also pointed out that the consumer goods manufacturers are already bearing the cascading effect of excise duty, sales tax and other inter-state levies which is reducing the industry’s growth and a tax on advertising, one of the key inputs for their growth, would lead to products becoming more expensive and further depress demand.