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EY hails FM's proposal of funds for start-ups in M&E sector & community radio stations

11-July-2014
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EY hails FM's proposal of funds for start-ups in M&E sector & community radio stations

As the Modi government took control of the state of affairs post historic General Elections, Union Budget 2014 has been one of the most awaited call-to-action for the stagnant economy, more so the media and entertainment sector that is in dire need of policy reforms.

From pending Phase III auctions, increasing the FDI limit to the next phase of digitisation have been issues haunting the expansion and perhaps even the sustenance of the M&E sector.

Commenting on the Budget, Rakesh Jariwala, Partner, EY said, “On an overall basis, the Modi Budget seems to be a balanced and a growth oriented budget.  The Budget has announced the setting up of a fund to provide finance as venture capital and soft loans to start ups.  The start-ups in the M&E space should benefit from this Fund as it would be an additional source for them to raise finance. 

The introduction of service tax on sale of ad space across platforms (except print media) will have a direct impact on the M&E sector.   Till date, service tax was not applicable on sale of ad space for internet and mobile media.  The impact of this additional service tax levy would really hinge on advertiser's ability to absorb the input service tax, which otherwise will become additional cost in the hands of the advertiser.   

The M&E sector has been subject to immense litigation on various direct and indirect tax controversies which extend to transfer pricing, withholding taxes, characterisation issues, etc.  This Budget has introduced measures which could reduce the litigation both past and in respect of proposed transactions.  These measures include roll back of Advance Pricing Agreements to preceding four years, extension of advance ruling mechanism to resident for income tax matters and resident private companies for service tax matters, simplification of transfer pricing rules, measures to make settlement commission authority more effective for income tax litigation, etc.”

On the Finance Minister Arun Jaitley’s proposal of allocating Rs 100 crore for community radio stations, Ashish Pherwani, Partner & Radio Segment Champion, EY said, “The proposal to grow community radio is an excellent initiative to enable social good, particularly for niche and specific sections of society.  The amount can be used for set-up of the stations and their on-going operations, and this will help bridge the gap between the number of licenses issued and the far fewer number of community radio stations that have become operational.  Since community radio will be airing news in some form or the other, monitoring the content of these stations will be important.”

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