The recent passing of GST has turned out to be the most important event in India’s history. With its implication on different sectors still being talked about, EY India posted a blog by Uday Pimprikar, Tax Partner, EY India, on how it can be a positive step towards overall accelerated growth in the media and entertainment sector.
Pimprikar has opined that the GST implementation might resolve the current bottlenecks for the sector such as dual taxation, cascading taxes and exorbitant rates though the effectiveness of the positive changes for the sector will depend on the fate of local entertainment taxes.
“The media and entertainment (M&E) sector has seen overall growth in all the segments, driven by rapidly rising incomes and evolving lifestyles. However, the M&E sector is plagued by multiple taxes at each level of the supply chain, leading to a complex tax structure with tax compliances at the Union, state and municipal levels. While GST would subsume the plethora of taxes and help achieve the objective of one nation, one tax, entertainment tax, which constitutes the last leg levy in the sector, could still be applicable to the extent levied by local bodies such as municipal corporations and panchayats. With the Government now advancing toward making 1 April 2017 a realistic deadline to implement GST, the M&E sector foresees it as a positive step toward overall accelerated growth in the sector,” Pimprikar explains in the blog.
He goes on to explain how will it impact certain segments including multiplex, film production houses, DTH and cable services. In the respect of DTH and cable services which are usually subjected to service tax and also incremental entertainment tax, Pimprikar points out that service tax and state-level entertainment tax will be subsumed in GST but the effective entertainment tax incidence is expected to reduce. He cautions, “However, the overall impact on the tax and revenue side will depend on the quantum of entertainment tax imposed by local bodies. Under the GST regime, the tax cost on procurements for DTH and cable service providers should reduce on account of larger availability of credits.”
This is quite a change from our previous story on GST’s implication on media and entertainment industry, where we spoke to analysts who seemed sceptical as “under the GST regime it might become a bit difficult for media companies as there might not be any central registration.” It also talked about the rate of GST which has still to be decided which was regarded as a complex issue which depends on current revenues, the expectations from GST, etc. This is something that needs to be decided by the appointed council.”
So from the looks of it as we near the deadline of April 1, 2017 only then we will able to assess the situation and decide whether GST is in favour of this sector or not.