The incidence of tax burden on the print industry is set to increase with the rollout of the goods and services tax (GST) from July 1. Under the new tax regime, newsprint will be subjected to a heightened tax rate of 5% as opposed to 3% earlier. Print advertisements, which are currently free from taxation, will also be taxed at 5%. While finer details concerning the tax arrangement are awaited, industry sources told exchange4media that the final call is yet to be taken.
The fundamental idea behind the GST is to simplify taxation procedures through standard rates. However, domestic publishers have previously communicated their apprehensions regarding the GST to the government. Their primary fear is the increased cost burden which publications will face under the GST.
However, Ashish Bhasin, who leads one of the biggest media agencies in the country, is dismissive of any large-scale disruptions owing to the GST on the print industry. “The GST for print is 5%. I think it will be largely revenue-neutral. In my view, there will not be a significant impact,” said Bhasin, Chairman & CEO – South Asia, Dentsu Aegis Network. When questioned about the concerns pertaining to 5% tax levy on newsprint, Bhasin argued that it could be treated as a set off by newspapers.
Suggesting agencies to charge it to their clients, he added, “Finally, it’s the end consumer that pays.”
But Anita Nayyar of Havas Media insisted that GST’s impact “will have to be absorbed” within the prevailing market budget.” Speaking from experience, she pointed out that “the clients have a particular budget” which generally does not head northward.
“It puts a lot of pressure on both the media and agencies to deliver the same impact to clients within the given budget,” said Nayyar, CEO – India & South Asia, Havas Media Group, while indicating that increase in service tax on a number of occasions has not been followed by a similar increase in budget. Without delving much into the future, she batted for carefully observing how the situation unfolds before passing any judgement.
Ace media planner Sam Balsara noted that almost every advertiser will set off the additional levy of GST against the tax paid by them. He explained that GST compliant publications will too benefit from the option of input credits. This alternative basically enables a company to reduce its tax burden on output by citing the input tax already paid on purchases of raw materials. “Earlier print being exempt, they could not avail the input credits. That should lead to some reduction in their costs. This should lower the print advertisement costs, though it is difficult to quantify this presently,” said Balsara, Chairman & Managing Director, Madison World. Interestingly, he noted that the agencies under the GST regime will cease to be mere “pass on” or agents of publications as under the service tax law.
Their status has now been elevated from P2A (Principal to Agent) to P2P (Principal to Principal). “It did not, therefore, matter that print was exempt, and no reversal of proportionate credit of service tax on inputs was required,” added Balsara, referring to the set-up which is being phased out wherein publishers are not liable to pay service tax. He further elaborated that agencies “need not reverse any input credit” and “utilise 100% of the GST credits for discharging their GST liability” since print is subject to 5% GST itself.
For Paresh Nath, Publisher & Editor-in-Chief of Delhi Press, the print behemoth behind almost three dozen magazines, the issue seems quite vexing. “Freedom of speech and expression should not be taxed at all,” asserted Nath, terming the government’s decision as “retrograde” and “undemocratic”. Similar arguments in favour of “zero-rate GST for newspaper survival” were echoed in an editorial published by The Economic Times in January.
“The GST seeks to maintain or reduce the tax burden in every sector. The current incidence of indirect tax on newspapers is about 1%. The only way to make sure this tax burden does not go up when GST is introduced is to zero-rate the industry,” he said, adding that a positive GST rate would be particularly averse to small publications which don’t attract premium advertising.
At a time when print advertising volumes are dwindling and publications have a low cover price, Nath emphasised that GST was going to get the costs involved in the business up by 5-10%. Having observed government functioning closely, he remarked that there was a huge possibility of the tax rate being gradually increased over the years by the establishment which would do great harm to newspapers.
Careers360’s Maheshwar Peri was not of the same opinion though. Conceding that the costs involved in the print business will “start bringing up”, he mentioned that it was a “small thing” given the fact that the tax burden on mediums such as digital has increased to 18%. “Of all the players, print should be the happiest. They shouldn’t complain so much,” said Peri, Founder & Chairman, Careers360. Nevertheless, Nath disagreed claiming that it is “not a question of 5% tax” but rather the “spirit of the tax” imposition. Identifying the powers extended to a taxman in the form of access to a publishing house as a major irritant, he opined that the entry of outsiders into the office space of a media company could lead to interference in the functioning of the press.