Union Budget 2015: Broadcasters welcome the move to reduce corporate tax
The Union Budget 2015 announced by Finance Minister Arun Jaitley is drawing mixed reactions from the industry. He had summed up the Union Budget address to the parliament saying, “People who urged us to undertake ‘big bang’ reforms also say the Indian economy is a super giant, which moves slowly but surely”. Spelling out that their estimated GDP growth for 2015-16 will be between 8 and 8.5 per cent, he expected the CAD for the year to be below 1.3 per cent of the GDP. The government also reiterated its commitment to GST, while the budget laid emphasis on the infrastructure, agriculture, corporate tax, among others.
Reduction in corporate tax a welcome move
One of the biggest takeaways for broadcasters was the reduction of corporate tax over the next four years which will help the industry.
Sudhanshu Vats, Group CEO, Viacom18 Media and Chairman, CII National Committee on Media & Entertainment said, “Two words sum up the essence of Budget 2015: balance and clarity. Finance Minister Arun Jaitley walked the tightrope by staying away from big bang announcements that might have strained the fiscal position, while taking substantial steps on matters of tax, social security and public investment (especially in Infrastructure). On the reduction in corporate tax rates to 25%, the 4-year implementation roadmap is a welcome addition. This is the clarity that the corporate sector needs so far as tax policy is concerned. The clarity on Corporate Tax road map is a welcome development for investments in the Indian M&E sector.”
Similarly, Tarun Katial, CEO, Reliance Broadcast Network said, “The overall budget seems to be well thought of with a holistic approach and some key announcements for the service industry. The proposed reduction in corporate tax over the next four years is encouraging as it will result in higher investments, growth and more job creation.”
S.K. Barua, CEO, Turmeric Vision (Food Food) said that the reduction of corporate taxes by 5% is a positive from the Union Budget and will put more disposable income in the hands of the corporates.
Long term vision
Most of the broadcasters agreed and welcomed the fact that the Union Budget was created which not only offered clarity but also put in place a long term plan for growth.
Punit Goenka, MD & CEO, Zee Entertainment Enterprises Limited (ZEEL) said, “Indeed a futuristic and growth-oriented ‘Super Budget’ presented by Arun Jaitley. The budget has certainly addressed the overall tax concerns and has portrayed a positive picture for the investors. It is certainly a budget to remember for the common man, since it has remarkably addressed all the key aspects like housing, jobs and education. Congratulations Arun Jaitley for wonderfully addressing the nation's concerns through the Budget 2015 and for setting some key goals for 2022.”
“It is a long term plan which they are putting together so overall it should be good for the economy as a result of which we hope that the advertising mood for the business will be good which will increase the advertising spends of companies,” said Barua. He further added, “The very important thing in the budget is giving more authority to States in terms of spends, so States will have more disposable income in their hands.”
Some pain points for broadcasters
There were however some pain points that the broadcast industry felt, one being the increase in service tax to 14% from 12.36% earlier which will affect advertisers to some extent; the other being no mention or inclusion of the media and entertainment (M&E) industry in the entire budget.
“The move to increase the service tax however will put smaller advertisers under pressure and hamper advertising spends,” said Katial.
Vats similarly said, “The increase in service tax is probably to bring the rate closer to the rates expected under the GST regime. In that context, the step is the proverbial bitter pill for our industry.”
Eshita Surana, Director, Aakash Aath said, “It is overall a very positive budget and will have good impact on the economy. But only one negative point I felt about the budget though you see the media industry is a very growing sector and has huge potential in it there has been no point of it mentioned in the budget. The budget was more looked from the infrastructure and agriculture point of view.”
“With Arun Jaitley also being I&B Minister, he understands the challenges faced by the media and broadcasting sector. So it’s good to see that TDS on technical services (including transponder charges) has been corrected to 10%. Broadcasting needs to be considered akin to infrastructure sector as it boosts the growth of democratic and digital India. For that there were also a couple of other tax anomalies that I didn’t hear about, unless it is covered in the details,” said Anuj Poddar, EVP, Viacom18 and Project Head – ETV Marathi and Gujarati.
“All in all it is a long term budget and nothing specific to the media industry but hoping that the environment will become conducive because of which advertising revenues will come in,” added Barua.
Our typical marketing budget is usually 10 per cent of the topline spend