Budget Wishlist: Print industry wants duties & taxes that impact newspaper production, and FBT to go

Budget Wishlist: Print industry wants duties & taxes that impact newspaper production, and FBT to go

Author | Abhijeet Mukherjee & Judy Franko | Monday, Feb 25,2008 6:41 AM

Budget Wishlist: Print industry wants duties & taxes that impact newspaper production, and FBT to go

The print industry is ready with its wishlist for the Finance Minister prior to the presentation of the Union Budget 2008-09. Among the industry’s demands are removal of the Fringe Benefit Tax (FBT), lower taxes on the purchase and sale of newsprint, among others.

A delegation of the Indian Newspaper Society (INS) has submitted a memorandum to the Finance Ministry, which broadly specifies: “Newspapers merit special fiscal treatment so as to maintain a vibrant and free press so vital for the survival of our democratic polity. Newspapers are referred as the Fourth Estate and the Indian Constitution itself states that State Governments shall not tax the sale and purchase of newspapers, that there should be no sales tax, excise duty or VAT on newspaper sale. In keeping with the spirit of the Constitutional provisions, it is necessary to ensure that duties and taxes which impact newspaper production are done away with or compensated or minimised to the extent feasible. This alone will ensure a fiscal environment which sustains diversity and plurality of ownership in the press and encourages maximum coverage, readership and reach in the populace.”

Pradeep Gupta, Chairman, Cybermedia, said, “Fringe Benefit Tax should be removed for the media industry as it is the case with other select industries. Secondly, the 5 per cent duty on paper should remain for LWC. The Union Budget largely ignores the industry.”

On the other hand, N Murali, Managing Director, The Hindu, said, “By and large the newspaper industry has not been expecting much for the last few Union Budgets, particularly because there is no need for a special dispensation for the industry, and secondly, taxes and duties have by and large been brought down to reasonable levels.”

Murali further said, “I feel that the media does not require any special treatment in the matter of taxes – direct and indirect – other than what the industry in general enjoys,” but agreed that the FBT, particularly on expenses like travel, were higher than most other industries and may be equated with the IT industry, which got some exemptions two years ago.

Jacob Mathew, Executive Editor, Malayala Manorama, and Publisher, The Week, and MD, MM TV, felt that with the introduction of VAT, the tax on purchase and sale of newsprint had gone up to 4 per cent. Earlier, in majority of the States, sales tax was either nil or a mere 2 per cent.

Mathew added, “The import of major consumables like printing ink, CTP plates, films, chemicals, etc., attracts duty of about 34.14 per cent. It warrants reduction to reasonable levels as they are essential production inputs. The print media in the country is in the midst of technological transformation and modernisation. The hi-tech capital equipment that are essential for the modernisation process are in the broad category of customs duty of 34.14 per cent. This rate also needs to be brought down to reasonable levels so that the Indian print media becomes a centre of global economy – a role which it is legitimately entitled to.”

“To encourage our industry to look at providing service overseas, the Government should remove service tax on overseas assignments. Till some years ago we used to enjoy income tax benefits under Section 80 HHC for export trade, but at that time also advertising agencies were not considered for exemptions. I would request the Finance Minister to introduce tax exemption for providing advertising consultancy/creative services for all overseas assignments,” said Srinivasan K Swamy, Chairman & Managing Director, RK Swamy BBDO.

“Honestly, I expect nothing from the Budget other than continuance of the problems that we face, or maybe they could make it worse,” Swamy remarked.

“We also need an urgent clarification on the Service Tax (Determination of Value) Rules, 2006, that the cost of media, particularly print media, is exempted from service tax computation. Service tax officials at the assessment level in Tamil Nadu are interpreting the notification (F.No.B1/4/2006 – TRU) dated April 19, 2006, wrongly (that is, including print media cost for paying service tax) and have passed orders on some agencies, which unfortunately also includes interest and penalty,” Swamy pointed out.

Shekhar Gupta, Editor-in-Chief, Indian Express, said, “The print media industry expects the Union Budget 2008-09 to look at the sector as an important catalyst for sustainable growth in India. While lately media has had robust profits, it now faces global competition and the market is getting divided and yields are lessening. To keep pace with the times, duties on imported printing machinery need to be reduced and completely withdrawn on virgin newsprint since only negligible amounts of it are produced domestically.”

Gupta had a word of caution for the policy-makers when he said, “The import duty on machinery tends to be prohibitive and there is an urgent need for the industry to get relief here. There is a risk of the industry going the textile industry way, if the opportunity for growth, expansion and modernisation is not provided.”

“The Indian media industry has come of age and yet it has a restriction of 25 per cent of FDI for the print media. In the interest of taking media companies to another level, a higher portion of FDI needs to be allocated. This would encourage foreign media companies to partner with Indian companies as their stakes would be higher and hence their commitment to share best practices and technologies,” Gupta added.

Sustaining newspaper operations based on pure circulation is a challenging proposition. The main reason is newsprint costs that account for around 40-45 per cent of total sales costs. Said Gupta, “Sustaining the operations and viability of newspapers, especially the smaller ones, can become cumbersome. In India, the newspaper industry is fragmented with the vernacular newspapers having the highest readership, followed by Hindi newspapers (9.2 per cent readership) and English newspapers (2.7 per cent). However, the English and the large Hindi newspapers garner more than 80 per cent of the advertising revenues. Hence, the government needs to provide some comfort on the 5 per cent import duty on newsprint.”

Also read:

Budget Wishlist: IBF gives its wish list to the Finance Ministry

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