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Budget Special: Print media prays for VAT exemption and lower Customs duty on Newsprint

28-February-2005
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Budget Special: Print media prays for VAT exemption and lower Customs duty on Newsprint

The entire media, be it print or electronic, has been running the extra mile every day for the whole of this month to highlight the concerns of industry as well as the common man, and figuring out how much the 'dream team' of Manmohan Singh and P Chidambaram will deliver. We at exchange4media took it upon ourselves to highlight the concerns of the media itself. After all, the media and the entertainment industry too has its problems and expectations.

The Print media, which is by far the oldest, largest and most dominant media vehicle in the country, for long has been clamouring for concessions to help lower the price of Newsprint, by far the largest component of the publishing industry's costs. On another front, after prolonged and contentious debate, the Government sometime ago allowed 26% FDI in the Print media. However, contrary to expectations, foreign investors are yet to bite the bait, making the infusion of foreign funds expectation a dampsquib, barring about three cases.

Most newspapers have one overriding prayer for the Finance Minister: complete exemption from VAT. The introduction of VAT, they say, could have serious repercussions - most importantly, that it could deliver a death blow to small newspapers who are dependent on Indian newsprint.

The broadcasting sector, on its part, buffeted by the scourge of rampant piracy, is demanding rationalization of countervailing duties so that the difference between the cost of imported and local products is removed. Broadcasters also want parity in duty rates with telecom equipment. And why not? It is the age of convergence. With Budget 2005 round the corner, exchange4media spoke to some key industry players to find out their wishlist.

N. Murali, Joint Managing Director, The Hindu

There are two issues of concern to the newspaper industry that we look forward to being addressed in the coming budget. One, the rates of import duties on some of the equipment and spares we employ in the newspaper industry is at almost 50%. This needs to come down to 25%.

The import duty on newsprint is currently reasonable. But the proposed VAT of 4% from April 01, 2005 is huge. There already exists a tax levied by the state governments which I think is appropriate. VAT for newsprint should be at 0%.

Sanjay Gupta, CEO and Editor, Dainik Jagran

There should be no VAT on newsprint. Traditionally, newsprint has been a tax-free item and therefore should be given the same status. For a big player, it really wouldn't make too much of a difference, but smaller players relying primarily on Indian newsprint will get killed this way. For smaller publications, the introduction of VAT is certainly not healthy.

We believe that the proposed reduction of import duties in line with the WTO agreement is healthy. No manufacturer will be able to understand its true potential without being open to competition. Trade barriers have to certainly come down and the manufacturers will have to incorporate constructive changes in their manufacturing processes to withstand competition.

Jacob Mathew, Executive Editor, Malayala Manorama

Rise in the price of newsprint by $90 per ton in the last one year and a further expected increase of about $70 this year will cripple the newspaper industry, as newsprint constitutes almost 65-70% of the turnover of a majority of newspapers. Therefore, the government should give relief to the newspaper industry by withdrawing the import duty of 5%. This relief also should be extended to newsprint made out of recycled pulp that contains less than 65% of mechanical wood fibre.

There should be no VAT on newsprint. Newspapers are an essential concomitant of a free society. Such a relief will buttress the fragile economy of newspapers and enable them to play their Ombudsman role. Service tax relief should be considered for transporters carrying newsprint and newspaper bundles. We would welcome the proposed reduction of import duties in line with the WTO agreement.

Indian Newspaper Society (INS)
Through a pre-Budget memorandum submitted to Finance Minister P Chidambaram, INS has sought complete removal of Customs duty on imported newsprint. It has also sought complete exemption under VAT which becomes operational from April 1, 2005. Under the proposed VAT tax structure, newsprint has been put in the 4% slab.

LWC (light weight coated) paper above 70 GSM, which is used by magazines and periodicals, attracts 40% duty, whereas LWC below 70 GSM attracts only 5.2% duty. INS has asked the FM to reconsider this, and allow import of LWC paper of above 70 GSM at 5.2% duty.

Rotary offset printing machines of speeds above 70,000 copies per minute can be imported at a concessional import duty of 5.2%. However, machines of lower speeds attract 40% duty. This is an anomaly since smaller and medium newspapers depend on the lower speed printing machines. INS has demanded that lower speed printing machines should be allowed to be imported at 5.2% import duty.

Entertainment Industry
The Music industry wants a pragmatic approach to tackle the menace of piracy. Like the Government took steps to curb the grey market for Gold and Cellular phones through a more rational levy structure, the Music industry has suggested lower tax rates on music cassettes and CDs under VAT regime. Otherwise, it fears an increase in the extent of piracy.

The Broadcast sector, too, wants countervailing duties to be rationalized, so that the difference between the cost of imported and local products is removed. Such a step could also help in the digitization of this industry. Broadcasters also want the duty structure on the cable and broadcasting sector to be rationalized and lowered to levels applicable for telecom equipment.

The issue of countervailing duty in respect of raw stock has been raised by the Film Federation of India and the Film Producers Guild of India. The film industry also wants abolition of service tax on the distribution business on the ground that film distribution is not a service sector activity. An extension of the exemption period for multiplexes in metros and non-metros for another three years under section 80 1B is also on their wishlist.

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