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Budget 2008-09: Despite positives in indirect taxes, mixed reactions from DTH industry

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Budget 2008-09: Despite positives in indirect taxes, mixed reactions from DTH industry

The Union Budget 2008-09 has brought some positive news for the DTH industry. At present, there is zero duty on import of set-top boxes (STBs). The Finance Minister has also removed duty on import of specified parts of STBs. According to DishTV’s MD Jawahar Goel, “This would provide leverage and opportunity for DTH players to evaluate the option of manufacturing STBs locally. Since the CVD is reduced from 16 per cent to 14 per cent, the costs would go down to the similar affect and would benefit the DTH operator who is already providing considerable subsidies to the consumer, and would further accelerate the rate of digitalisation in the country.”

Sun Direct’s Tony D’Silva added, “I think the reduction in duty is a step in the right direction. However, I would have been happier if it was reduced to 8 per cent. The Budget is a balance between strengthening our economic progress and reducing the financial burden on the common man, especially the farmers.”

On the other hand, Vikram Kaushik, CEO and MD, Tata Sky Ltd, said, “There seems to be no significant difference to the DTH sector, which is reeling under unprecedented tax burden (56 per cent) as no special mention has been made of the bigger items like differential treatment on service tax due to double taxation and desired level of reduction in excise duty on STBs.”

Also, for the first time the broadcast and film industry has been given a status along with the IT sector, thus bringing down the duty on capital equipment from the present level of 10 per cent to 5 per cent, which will further boost investment in the industry. Goel said, “This will have an impact on the capital expansion plans of the sector and will improve bottomlines.”

Deepak Chandani, CEO, Wire and Wireless India, the company owning SITI brand, has welcomed the duty waived on digital STBs and reduction in duty for convergence products. He said, “We were long awaiting such a change. This path breaking initiative will tremendously encourage the multi-system operators (MSOs) to go for voluntary digitalisation and facilitate a win-win proposition for all the players in the industry.”

Goel was also of the opinion that the new provision introduced by the Finance Minister in service tax, stating that any item being provided under the ‘Right to Use’ to the customer but not covered under VAT would now be covered under ‘Right to Use’, was a move towards the Goods and Service Tax regime (GST regime), and would partly address the issue of multiple taxation on the DTH industry, where currently along with the service tax, VAT was also being charged on the Consumer Premises Equipment (CPE) when the same were being given on rental or lease models.

He added, “This will help the DTH industry to give more options to the consumers to acquire the CPE on rental. The same is stipulated by TRAI in its Quality of Service requirements. This move will benefit the industry by taking the CENVAT credit of the service tax paid and thus, will positively impact the cash flow of the capital intensive businesses. DishTV feels the Budget takes the industry towards a positive direction and is a definitely a step forward in addressing the multiple layers of taxation being faced by it. We demand the entertainment tax duty should also subsume in the GST regime. Electronic equipment duty has also been reduced, which will expand the market. Special thrust has been given to the power sector and rural economy, which will improve business prospects for the DTH and entertainment industry.”

Bringing another point of view here, Apurva Purohit, CEO, Radio City, commented, “Exemption from CVD has been withdrawn on specified parts of STBs. The implementation of CAS in specified zones has already not kept pace. Withdrawal of exemption from CVD on specified parts of STBs would further slow down the rollout of CAS. Excise duty of 8 per cent on video cassettes would lead to rise in cost for the broadcasting industry, whereas on the other hand, TRAI has capped the pricing for broadcasters. This is negative for the broadcasting industry. Subscription revenues will become a key to the success of broadcasters and the print media.”

Also read:

Budget 2008-09: A tricky balance between growth rate and political reality

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


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