Will GST bring taxation to the print industry?
As India prepares for GST regime with the appointed GST council expecting to roll out GST by April next year, one sector that could be in for changes is the print sector
As India prepares for GST regime with the appointed GST council expecting to roll out GST by April next year, one sector that could be in for changes is the print sector. Currently, among all mediums, print is the only one that is exempt from any form of indirect tax.
“The list of exempted services has not been given yet but print is constitutionally under GST,” said Utkarsh Sanghvi, Tax Partner, EY, suggesting the possibility of print being brought under the ambit of indirect taxation under GST in some manner.
“Print companies in India import newsprint. Today, newsprint is not liable for any import credit. And it will be a huge challenge to match off those credits across their printing locations and sales offices across different states. Even if they are exempted, it will be a cost. In both cases, it is going to be a little negative for print companies,” he further explained.
However, there is still lack of clarity around what the actual impact on print will be.
“The impact of GST on the print industry is still vague. We will have to wait for the GST draft guidelines and the substantive stand of our state government in its successful implementation. The effect of the so-called game-changer will be known only after it is put to practice,” believes MV Shreyams Kumar, Director of Mathrubhumi Group.
Mitrajit Bhattacharya, President & Publisher of the Chitralekha Group and President, AIM, refused to be drawn into a comment, citing the lack of any tangible information. He said that a tax rate of between 18-20 per cent would be ideal for India Inc.
An earlier report by a committee led by Chief Economic Advisor of India (CEA), suggested three categories of applicable GST rates i.e. standard rate, lower rate for certain goods and demerit rate.
Explains Rajeev Dimri, Leader, Indirect Tax, BMR & Associates LLP, “Industries like automobile, cement, electricals, etc., which presently suffer from cumbersome tax weight of around 20 to 40 per cent will now have an opportunity to offer their products at more competitive prices by leveraging on the reduced tax rates. On the other hand, services sector which presently attracts a lower rate of 15 per cent and sectors such as textile/ garments, pharmaceuticals, etc., which enjoy exemptions are likely to experience a hit of high GST rate in the initial years.” He, however, noted that this is based on suggestions made by the CEA’s report and the actual decision on rates and exempt services will have to be taken by the GST council.
During his 2014 budget speech, Finance Minister Arun Jaitley had announced that digital and mobile advertising would be removed from the “negative list”, the services which are exempt from indirect taxes. The idea was to broaden the scope of taxation and it is possible that this policy would be continued under the GST regime. At that time, a number of digital and mobile agencies we spoke with felt that it was perhaps not the best move for the fledgling industry.
On the other hand, there were also certain sections that felt the introduction of service tax will not have a major impact on the sector. For example, Smita Jha, Leader (Entertainment & Media Practice) at PricewaterhouseCoopers India, had said that it was a positive step for the long run as India prepares for adopting the GST.
The exclusion of print media from the ambit of indirect taxes has been the cause of some consternation among executives in the other mediums, which was further exacerbated by the increase in service tax that was announced in last year’s budget.
For example, after the levying of service tax on the online advertising, Zafar Rais, CEO of MindShift Interactive, said, “The new government’s maiden budget proposes to levy service tax for online and mobile advertising which we believe will adversely affect the industry’s growth. It reflects differentiated treatment as traditional print media remains unaffected with respect to the tax purview but new digital media that is actually driving innovation will have to unfortunately bear the brunt."
However, now that the rollout of GST is nearing fruition, it is possible that this might be about to change.
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