Restoring Section 22 to the Prasar Bharati Act is expected to figure in the Budget wishlist of the information and broadcasting (I&B) ministry. If granted, this would exempt the public broadcaster from paying service tax, which is currently pegged at 8 per cent.
Although several rounds of negotiations took place between I&B and finance ministries on this issue during the NDA regime, no decision was taken to restore Section 22. But, as pre-budget deliberations begin first week of June, the I&B ministry is gearing up with its demand all over again, according to a senior ministry official. However, I&B minister S Jaipal Reddy is yet to approve the wishlist.
According to Section 22 of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990, it was exempted from payment of income tax or any other tax. As per the interpretation of Section 22, it was held that the corporation was not liable to pay any service tax also. But, since private broadcasters were in the service tax net, the 2002 budget sought to level things out. The Finance Act 2002, through section 153, omitted Section 22 of the Prasar Bharti Act, bringing the pubcaster on par with others.
In its presentation to the Central Board of Direct Taxes (CBDT), a few months ago, Prasar Bharati had even sought tax exemption on its income, by claiming to be a charitable institution under Sections 11 and 13 of the Income Tax Act, 1961.
Prasar Bharati CEO KS Sarma had confirmed the move. The corporation had reasoned at that point, that Prasar Bharati is a public broadcaster and a non-commercial venture. Also, its annual expenditure stood at Rs 1,900 crore, while its earnings were only Rs 685 crore in 2002-03.