Home >> Advertising >> Article

Nearly Rs 20,000 cr adex to get boost under GST

16-June-2017
Font Size   16
Nearly Rs 20,000 cr adex to get boost under GST

Sectors like FMCG, consumer durables, retail, and automotive will benefit from the forthcoming Goods and Services Tax regime rollout because of reduced advertising costs, claims an E&Y report on the impact of GST on advertising released on Thursday. These sectors will be able to advertise more within the same budgets allotted for advertising when the new tax regime comes into play. Some sectors like banking and financial services, alcoholic beverages will, however, feel the brunt as the effective cost of advertising will increase under the regime, the report said.

The FMCG industry spent approximately Rs 12,492 cr on advertising (32% of the total adex) in 2016. Once GST comes into effect, this industry will be able to avail full input tax credit because most FMCG companies have set up their factories in excise free zones, as area-based exemptions are likely to be withdrawn under GST. Therefore, FMCG advertisers will be able to advertise more in the same budget as the cost of advertising will reduce. The report cautioned that FMCG companies will need to educate sales teams to prevent downward rate pressure due to optical increase in advertising budgets.

Similarly, the automotive sector, which is the second biggest advertiser (Rs 4,030 cr adex in 2016), is expected to have a positive impact under the new regime. Auto companies engaged in the import of completely built units were not eligible for input tax credit of service tax charge in the pre-GST regime as their output tax was only subjected to state VAT. Under the GST regime, such companies would benefit from availing full input tax credit. Therefore, auto companies will also be able to advertise more in the same budgets. Much like FMCG and auto companies, consumer durable companies will experience a reduction in advertising costs as well.

Positive impact

Negative Impact

Sectors such as e-commerce, BFSI and Alcoholic Beverages will be negatively impacted by the GST rollout. In the case of the e-commerce sector which contributes more than Rs 1,500 cr to the nation’s advertising pie, loss making companies in the sector that have accumulated credits could initiate budget curtailment due to cash blockages in credits. In addition, depending on working capital requirement of e-commerce companies, advertising budgets may increase or decrease. Sectors like BFSI and alcoholic beverages will be forced to spend more for the same volume of advertising under the new regime. The negative impact is because banks will have to continue to reverse partial input tax credit under the new regime just as they did under the pre-GST regime.

According to the report, companies in the banking and financial services sector will be able to advertise less in the same budget, as effective cost of advertising will increase under GST regime. The BFSI sector spent around Rs 1,400 cr on advertising in 2016. The third largest advertising spenders - telecom companies - will weather the impact of GST. As per the report, telecom companies, which are eligible to avail input tax credit of taxes charged on advertising spends, will continue to avail full input tax credit of GST charged. Therefore, GST rollout may not heavily impact the telecom sector in any way.

Tags

Varun Raina, Marketing Manager, Airbnb India speaks to exchange4media about the successful #LiveThere campaign and how Bollywood helps them connect with its young consumer

Tim Castree is all praises for his team in India and trusts it to be a result of “an excellent execution of agency’s global strategy” headed by Kartik Sharma

Siddharth Dabhade says Criteo’s technology allows brands to engage with shoppers, create relevant experience on retail apps, thereby driving sales and profits

Shantanu Gangane says OTT platform Viu plans around 20+ originals and is all set to enter the Tamil market with a mix of syndicated and original content

right
left
OFF THE CUFF HAS JOURNALIST ARUN SHOURIE IN CONVERSATION WITH SHEKHAR GUPTA IN MUMBAI IAA HOSTS FIRST INDIAA REGIONAL AWARDS (TELUGU) IN HYDERABAD BREAK THE CEILING TOUCH THE SKY 2018 SEES OVERWHELMING INDUSTRY PARTICIPATION 10TH EDITION OF ABC EUREKA AWARDS IN MUMBAI CELEBRATES WORK OF PARTNER AGENCIES EMINENT JURY PICKS LOUDEST’S 100 MOST POWERFUL INDIAN MUSIC BUSINESS LEADERS MODE LOFT BY SABGROUP LAUNCHES SIGNATURE MENSWEAR POWER DRESSING CLOTHING LINE TOP MARKETERS DISCUSS ART AND SCIENCE OF EFFECTIVE LISTENING @PITCH CMO SUMMIT 2018, DELHI THIRD SEASON OF ‘INDIA’S TOP DIGITAL PLANNERS’ RECOGNIZES EXCELLENCE IN THE DIGITAL INDUSTRY WOMEN ECONOMIC FORUM 2018 SEES DISTINGUISHED GLOBAL PERSONALITIES IN ATTENDANCE PEPPER CREATIVE AWARDS 2018 RECOGNIZE THE BEST IN ADVERTISING IN SOUTH INDIA RADIO CITY’S POWER OF RADIO MEET HOSTS TOP ADVERTISING INDUSTRY LEADERS TOP INDUSTRY PERSONALITIES ATTEND ZOOM-MYNTRA EVENING TO CELEBRATE THEIR PARTNERSHIP LEADING MARKETERS, EXPERTS SHARE INSIGHTS ON DIGITAL TRANSFORMATION @ADOBE SYMPOSIUM IN MUMBAI NICKELODEON TRADE PARTY SEES MARKETING INDUSTRY LEADERS AND THEIR FAMILIES IN ATTENDANCE GOLDEN MIKES RADIO ADVERTISING AWARDS 2018 RECOGNIZE INDUSTRY’S MOST DESERVING ACHIEVERS AIMA MANAGING INDIA AWARDS HONOUR THE BEST IN THE INDUSTRY BW BUSINESSWORLD’S GREAT INDIA DEBATE BRINGS TOGETHER INTELLECTUALS ACROSS INDUSTRY SECTORS BW BUSINESSWORLD SMART CITIES CONCLAVE PATNA 2018 SEES EMINENT INDUSTRY LEADERS IN ATTENDANCE EMINENT JURY PICKS WINNERS OF GOLDEN MIKES RADIO ADVERTISING AWARDS MADDYS 2018 SEE TOP ADVERTISING AND MARKETING INDUSTRY LEADERS IN ATTENDANCE

Radio Mirchi maintained its top spot while Fever FM replaced Big FM at the second spot in Kolkata

Singh explains why marketers should focus more on maintaining the core essence of a brand and not just innovations

Venkat brings with him over 20 years of extensive experience of working in media, creative, cultural and knowledge industries on several international projects in over 30 countries.