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Broadcasters positive about GST but expect slowdown during transition period

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Broadcasters positive about GST but expect slowdown during transition period

As India gears itself for a massive transformation into a new system of indirect taxation aimed to create a uniform market in the country and boost GDP, broadcasters are looking forward to the positive impact of GST (Goods and Services Tax) once it rolls out on July 1. They are upbeat about the passing of the Central Goods and Services Tax (CGST) Bill, the Integrated GST (IGST) Bill, the Compensation GST Bill, and the Union Territory GST Bill 2017. They expect GST to ease their business and bring in transparency and efficiency.

M K Anand, MD and CEO, Times Network, says, “It’s mainly tax neutral for the broadcasting industry. However, with only GST, the applicability of double taxation of VAT (Value Added Tax) and ST (Service Tax) on some of the services will be removed. Hence, GST will help to resolve certain tax hurdles in the current tax regime.”

NP Singh, Chief Executive Officer, Sony Pictures Networks India, adds, “The uniform tax brings in more transparency and efficiency in the system. I see it as a positive development for the economy and for our sector.”

Expect a lull period

However, broadcasters are expecting a slowdown during the transition period as the entire country will be shifting to another taxation system. Singh says, “When it (GST) comes in, we will be getting ourselves into a little bit of disruption. In three to four months’ time, it will all settle down and come back to normalcy.”

Pawan Jailkhani, Chief Revenue Officer, 9X Media, agrees, “There will be some hiccups during the transition period. The entire country and categories are shifting from one taxation to another. So, the first two to three months will be a lull period. Television largely depends on FMCG, telecom, and automobile. Hence, once GST rolls out, there will be a slowdown. Pricing for the whole industry will change and that will impact advertising. Post the transition period, advertising will grow. It will have a positive impact. I think it's a wonderful tax structure. In the long run, it will benefit hugely, specifically us. Largely, it's good for the advertising industry and indirectly, broadcasters or any other medium, which depends on advertising.”

Issues to be addressed

Despite the positives, broadcasters are concerned about the lack of clarity on taxation slab, tax rate, and place of supply, which need to be addressed before the roll-out.  Anand shares, “The GST bills are well-designed, simplified, and will rationalize the current indirect tax regime along with eliminating the tax cascading effect. The biggest concern for the industry would be to decentralize compliance with no clarity on the rate of tax applicable on broadcasting services including subscription.” He adds, “The biggest concern of GST is that there is no clarity on Place of Supply, Tax Rate, preparedness of all stakeholders with GST ready systems, and de-centralized registrations.”

Jailkhani raises a different concern about the disparity between mediums, saying, “There is still lack of clarity in terms of taxation slabs. Goods tax which is largely driven by FMCG comes under the lowest tax slab, which is five per cent. There are two elements to it: How will it impact advertising? How will the industry thrive on this? As for the broadcasting industry, there will be benefits. With the service tax getting replaced by GST, the TV industry which is paying 15 per cent service tax will pay 18 per cent now. That is on advertising. There will be a saving of 2 or 2.5 per cent on a broadcaster level. That's the current structure. The problem is while TV is at a 15 per cent service tax; print was not more than five per cent. That clarity has not been there between different mediums. Broadcasters are questioning this disparity.”

He adds, “Clarity is not there in taxation between State GST (SGST) and Inter-State GST (IGST). That needs to be clarified. Within a month’s time it will be cleared. If it applies immediately from July 1, there will be a cash issue because we are paying 18 per cent immediately. But there will be benefits as well.”

Partho Dasgupta, CEO, BARC India, also feels optimistic about the GST roll-out. At the same time, he also voices his concerns about the upcoming taxation structure. He says, “We welcome the move and it's beneficial to the larger industry in the long run. However, as far as BARC India is concerned, I feel one of the critical issues that needs to be addressed is clarity on taxability of movement of BARC India’s meters, which are placed inside households to monitor viewership. As per the current GST framework, supply of goods or services without consideration to related persons or a taxable person, shall be treated as a supply, which would be liable to GST. This will have a big implication on our business. Further, the households are neither related persons nor taxable person as per the current GST framework. Hence, ideally such movement should not be taxed.”

He raises another issue on state-wise registration. He explains, “The GST framework currently mentions state-wise registration for CGST, SGST, and IGST based on the place of provision of service. Since BARC India meters are installed across the length and breadth of the country to comply with MIB (Ministry of Information and Broadcasting) guidelines, there is a need for single registration window so that credits from the states can be transferred, and payment can be made from designated central premises.”

He concludes, “There are still gaps that exist in the way the law is currently framed. As for any big change this too will have a transition period and learning curve both for the industry and the government. I am hopeful that we will resolve these finer points amicably with the authorities.”

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