MxMIndia

Category: BUDGET 2012

  • In Freaking News, which will now appear every Tuesday and Friday, Ranjona Banerji reviews the fare in the morning papers and the nightly news. And sometimes the afternooners, the newsmags and all that’s on the Web

    Budget 2012: Ranjona Banerji on how TV Channels fared with their Budget specials

    By Ranjona Banerji

     

    Soon after India liberalised her economy, the late great Nani Palkhiwala, whose budget analysis speech would fill up Brabourne stadium, decided that there was no longer any need to discuss the budget. Yet in India, it is still a grand tamasha event and even more so, with the massive explosion of television. Before the TV days the best we had to contend with were the massive graphics on the front page of The Economic Times, with the “fin min” portrayed as some kind of super hero or failing that, a comic character.

     

    (By the way, thank god they don’t call them fin mins any more or maybe Pranab Mukherjee threatened dire consequences.)

     

    From early on Friday morning, all the channels were in a high state of excitement as they discussed what the budget could be, what they wanted it to be and so on. Despite the Economic Survey of the day before, no one had too many clues though everyone wanted reforms. Some business types even conceded that the poor and less fortunate needed help while the economists looked askance at the idea. This continued till 11 am when everyone had to switch to the feed from the Lok Sabha channel.

     

    After that, it was a juggling act to get the best interpretation of the budget as it happened. I started with juggling between NDTV and NDTV Profit because the discussions headed by Prannoy Roy on one and Vikram Chandra on the other were interesting. But then they filled their screen with so much other information that I lost track of the “fin min” (oops).

     

    So I surfed till I reached CNNIBN which had the cleanest screen of the lot. No millions of shares going up and down, no “insta analysis” from experts as provided by Times Now and no tweets from the general public. Suddenly however CNNIBN started running a little cartoon man with placards saying “cool”, “good idea”, “bad idea” to several budget proposals which became a tad distracting. When I started spending more time figuring out if the cartoon man’s moustache changed position as he changed placard from cool to bad idea, I realised CNNIBN was also a bad idea and shifted to the Lok Sabha channel.

     

    I did surf through the business channels but not only were the screens cluttered with shares going up and down, they were also full of acronyms which I could not decipher. Seemed like maths class after some time – if you put the ELSS on the SME and divide it by the ECB you realise that the squaw on the hypotenuse is actually sleeping with the Big Chief. Or something like that but probably not as exciting.

     

    The speech took two hours, after which the viewer was exhausted but the analysts were chomping at the bit to take off and expound. The economists and journalists all hated the budget while the industrialists, bankers, investment and money people did not think it was so bad. It was clear that the journalists and economists were deeply hurt that Air India had not been sold, petrol prices had not been increased to Rs 150 a litre and even worse, so much money had been given to NREGA, rural and urban health and education and so on. Others talked about how “inclusive growth” was necessary in a politically correct manner, except for one man on one of the business channels who talked about “socialist stuff… health and all this blah blah”. One can only hope no one he knows ever has need of “blah blah”.

     

    As the evening progressed, Times Now looked at the politics of it and Headlines Today and NDTV went quite quickly into Sachin Tendulkar’s 100th century (glory be, at last, what a joyous day for Pranab Mukherjee). The business channels divided themselves us as some looked at property, others at investment and others at the stock market.

     

    Interviews with Pranab Mukherjee were shown on NDTV with Prannoy Roy and TN Ninan, on Times Now with Arnab Goswami and Navika Kumar, on CNBC with Raghav Bahl and on CNNIBN through Lok Sabha TV with a young man who Rajdeep Sardesai told us was a TV18 staffer. Whatever. Mukherjee’s famous temper was on display only with Raghav Bahl when he told him quite categorically that he was not going to get into a “school debate” with him. For all the posturing that the experts did on the other channels about the budget and the deficit and so on, only Bahl asked the really tough questions. Not that it came to anything.

     

    The verdict at the end: a choice between CNNIBN, NDTV for regular channels and Bloomberg and CNBC at the business end. The winner is possibly the remote, in that case.

     

  • What the Finance Minister's proposals mean for business

    Budget 2012: What it means for India Inc

    Local Deals Under Transfer Pricing

    This is bad news for companies as their tax outgo and compliance burden will rise. Firms use transfer prices to shift profits to tax havens. The new rule will increase documentation for companies. Right now, these rules cover only deals between a domestic company and its overseas subsidiary.

     

    No More Tax Surprises

    An advance-pricing agreement is good news for MNCs investing in India. It will reduce disputes as taxpayers would know their liability on transactions within their group companies in advance. These pacts are binding on both the taxpayer and the government, but can be quashed if the taxpayer misinterprets facts. The agreements will end aggressive assessments and reduce tax arrears locked up in litigation.

     

    Declaring Foreign Assets a Must

    Taxpayers must declare overseas assets and income-tax offi cers can reopen their books for the past 16 years. The fi rst development could pave the way for an amnesty scheme while the second will increase compliance burden on taxpayers but check tax evasion.

     

    Dressing Up Cash Trails to Get Tougher for Cos

    Share premium in excess of fair market value will be treated as income. This will increase the tax outgo for firms as share premium has so far been treated as capital. A similar move to impose tax on cash credits, unexplained money and investments will check evasion. It will end the practice of closely-held companies laundering black money by bringing it back as share capital.

     

    Offshore Transfers to Come Under Tax Net

    In a big blow to foreign investors, the government has re-written law so that it can tax indirect transfer of capital assets or property located in India. The amendment, effected retrospectively from 1962-63, will empower the government to impose capital gains tax on Vodafone and other such M&A deals in the past. It’s one step back in tax reforms.

     

    Source:The Economic Times

    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • Eco-system for early stage companies set to improve with proposal to remove restrictions on venture capitalists

    Budget 2012: Entrepreneurs may find fund-raising easy with removal of restrictions for VCs

    By Paramita Chatterjee

     

    The eco-system for early stage companies is set to improve as the FM proposes to remove restrictions on venture capitalists, who earlier gained tax benefits on investments in nine specified sectors. The removal of this sectoral cap will make fund raising easier for entrepreneurs going forward.

     

    Besides, the proposal to float a Rs 5,000 crore India Opportunities venture capital fund with SIDBI to help start-ups is seen as a step to benefit micro and small enterprises (MSMEs) across the country. As per estimates of Federation of Indian Micro and Small & Medium Enterprises (FISME), there are currently 26 million MSMEs present in India, of which only 5% has access to institutional funds. “Any kind of equity support to MSMEs is welcome as it was greatly needed,” said Anil Bhardwaj, secretary general at FISME.

     

    However, analysts feel the amount is still too little. “The initiate to set up a fund for MSMEs is good but the budget allocation is small,” said Raja Lahiri, partner at advisory services firm Grant Thornton. But overall, its a good start, as currently not many MSMEs would require capital for expansion, said Bhardwaj.

     

    Source:The Economic Times

    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • Ernst & Young Post-Budget Analysis of Direct and Indirect tax proposals in Media & Entertainment Industry

    Budget 2012: Ernst & Young Analysis of Direct & Indirect Tax proposals in M&E

    Ernst and Young shared with MxMIndia its analysis of what the Union Budget 2012’s tax proposals mean for the Indian media and entertainment sector:

     

    Foreword

    Union Budget 2012-13 was keenly awaited by the Indian businesses and Foreign Investors/ businesses alike largely to see if the Finance Minister (FM’) chalks out a credible path for the reforms process which seemed to have been halted. The FM has announced several steps for agriculture, infrastructure and capital markets, and their impact on the economy will need to be analysed.

     

    On the direct tax front, there are several surprises in form of various amendments proposed, some of which were particularly not anticipated in view of the report submitted by the Standing Committee on Finance (SCF’) of the Parliament on the Direct Taxes Code 2010 provisions on 9 March 2012.

     

    On the indirect taxes front, most of the amendments were largely anticipated. In fact, the film industry received a centenary year gift in form of exemption from service tax. Rate of excise duty has been increased from 10.3% to 12.36% from 17 March 2012 while similar increase in service tax is effective from 1 April 2012.

     

    Some of the key tax measures announced by the FM are as follows:

    • Direct Taxes Code (DTC’) to be enacted after giving due considerations to the report of the SCF
    • Goods and Service Tax (GST’) Network, the IT backbone for GST, to become operational by August 2012
    • Advance Pricing Agreements (APA’) and General Anti Avoidance Rule (GAAR’) provisions proposed as amendments to the domestic income tax law
    • Permanent Account Number – income tax identification number – to be used as a common identifier for direct tax and indirect tax purposes to ensure transparency and check on tax evasion
    • Setting up a study team to examine the possibility of a common tax code for service tax and central excise

     

    The FM also announced a five pronged strategy to tackle the malaise of generation and circulation of black money and its illegitimate transfer outside India. Government has taken a number of proactive steps to implement this strategy. As a result:

    • 82 Tax Treaties and 17 Tax Information Exchange Agreements have been finalised and information regarding bank accounts and assets held by Indians abroad has started flowing in. In some cases prosecution will be initiated
    • Dedicated exchange of information cell for speedy exchange of tax information with treaty countries is fully functional in Central Board of Direct Taxes
    • India became the 33 rd signatory of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters
    • Directorate of Income Tax Criminal Investigation has been established within the tax administrative set up

    In this tax alert, we have summarized some of the key amendments proposed in the Budget 2012 which may have an impact on the M&E Industry. For detailed summary of the Union Budget, please refer to the Ernst & Young India Budget Plus 2012.

     

    Direct Taxes

    While outlining the direct tax proposals, the FM mentioned that his proposals for the financial year 2012-13 mark further progress in the direction of movement towards the proposals outlined in DTC. Key proposals are summarized as under:

     

    No changes are proposed in the corporate tax rate.

    It is now proposed to clarify by way of a deeming fiction that share or interest in a company or entity registered or incorporated outside India shall be situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India. This clarification will be applicable with retrospective effect from 1 April 1962 (ie assessment year 1962-63). This proposal has the effect of neutralising the recent ruling of Hon’ble Supreme Court in case of Vodafone from a retrospective effect.

    Considering the conflicting decisions of various courts in respect of income in nature of royalty’ and to restate the legislative intent, it is proposed to amend the definition of royalty retrospectively from 1 June 1976, in following manner:

    • Transfer of all or any right for use or right to use a computer software (including granting of a licence) is in the nature of royalty’ irrespective of the medium through which such right is transferred.
    • Royalty includes consideration for any right, property or information whether or not possessed by the payer, directly used by the payer or located in India.
    • The term process’ in the royalty definition to include transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret.
    • This proposal could lead to characterisation of payments towards use of computer software, information, databases, transponder, uplinking facilities, leased lines, etc as royalty under the domestic income tax law with a retrospective effect.
    • Presently, income of a Venture Capital Fund (VCF’) or Venture Capital Company (VCC’) derived from investment in a domestic company ie Venture Capital Undertaking (VCU’), is exempt from taxation, provided the VCU is engaged only in nine specified businesses. The investor in VCF/ VCC is taxable upon distribution being made by the VCF/ VCC on a deferred basis. In order to avoid multiplicity of conditions in different regulations for the same entities, the sectoral restriction on business of VCU is proposed to be removed, and the income is now proposed to be taxed in the hands of the investor in VCF/ VCC on an accrual basis and be subject to withholding tax. The investments in M&E sector through VCF/ VCC route will now be eligible under the provisions, which was earlier not possible.
    • It is now proposed that when a company in which public are not substantially interested, receives a consideration for issue of shares from an Indian resident in excess of face value of its shares, the aggregate consideration received for such shares in excess of the fair market value of the shares will be chargeable to tax in the hands of such company. This provision could lead to structuring and commercial challenges in case of a joint venture with a non-resident participation or foreign investments in Indian companies in form of private equity or such other route with lower than 100% interest.
    • Presently, there are no specific requirements under the domestic income tax law to grant tax treaty benefits to a non-resident taxpayer on the basis of Tax Residency Certificate (TRC’). It is now proposed to make submission of TRC containing prescribed particulars, as a necessary but not sufficient condition for availing benefits of the tax treaty.
    • Presently, income received by non-citizen and non-resident sports persons from participation in any game or sport, advertising or contribution of article in any newspaper etc and income of non-resident sports association or institution for guarantee money payable to such institution in relation to any game or sport played in India is subject to tax at the rate of 10% of the gross receipts. It is now proposed to increase the tax rate from 10% to 20% on gross receipts.
      It is further proposed to tax income arising to a non-citizen, non-resident entertainer (such as theatre, radio or television artists and musicians) from performance in India at the rate of 20% of gross receipts, which was earlier taxable at the rate of 30%.
      Consequential amendment is also proposed in the withholding tax provisions to provide for withholding of tax at the rate of 20% from income payable to non-resident, non-citizen entertainers, sportspersons, sports associations etc and will be applicable with effect from 1 July 2012.

     

    • It is now proposed to widen the scope of compliance of withholding tax provisions for payments to non-residents by clarifying that the obligation to withhold tax on payments to non-residents applies and extends to all persons, resident or non-resident whether or not the non-resident person has a residence or place of business or business connection in India or any other presence in any manner whatsoever in India. This proposal intends to cast an obligation on the non-resident irrespective of such person’s territorial nexus with India.
    • Under the existing provisions of domestic income tax law, as a one-time’ concessional measure, dividends received by a resident company in India from its foreign subsidiary was taxable at the rate of 15% for financial year 2011-12. It is now proposed to extend the applicability of this provision by one more year ie for the financial year 2012-13.
    • It is now proposed to remove the cascading effect of dividend distribution tax (DDT’) from multi-tier structure. Dividends distributed by a holding company will not be subject to DDT to the extent of amount of dividends received from the subsidiaries by such holding company in the same financial year, effective from 1 July 2012.
    • To offer better assurance on transfer pricing methods and certainty and unanimity of approach, it proposed to introduce APA regulations with effect from 1 July 2012.
    • It is now proposed to amend the definition of international transactions’ for the purpose of transfer pricing provisions with retrospective effect from financial year 2001-02. It is also proposed to extend the transfer pricing regulations (including procedural and penalty provisions) to specified domestic transactions entered into between domestic related parties or by an undertaking with other undertakings of the same entity. These provisions will apply only in respect of specified domestic transactions exceeding INR 50 million.
    • To codify the doctrine of substance over form’, it is proposed to introduce GAAR provisions to determine tax consequences by taking into account real intention of the parties, effect of transactions and purpose of an arrangement.
    • As an anti-avoidance measure, it is now proposed to grant additional power to the Tax Officer to declare an arrangement to be an impermissible avoidance arrangement under certain circumstances and refer such cases to the higher level authority (ie Commissioner of Income-tax). The onus is on the taxpayer to establish that the arrangement was not executed with a view to avoid taxes.
    • Under the existing provisions of domestic income tax law, every person is required to furnish a tax return if his income during the financial year exceeds the maximum amount which is not chargeable to tax. It is now proposed to amend the provisions for filing the tax return in India to make it mandatory for every resident having any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India irrespective of the fact whether the resident taxpayer has taxable income or not. This amendment will take effect retrospectively from 1 April 2012 (ie assessment year 2012-13).
    • It is now proposed that the Alternate Minimum Tax (AMT’) provisions (introduced for Limited Liability Partnerships in the Budget 2011) should be extended to include certain specified persons (other than a company) and such persons be made liable to pay AMT at the rate of 18.5% (Effective Tax Rate of 20.00%) when their adjusted total income exceeds INR 2 million.
    • It is now proposed to increase the exemption limit for carrying out tax audit of a person carrying on business from INR 6 million to INR 10 million; and a person carrying on profession from INR 1.5 million to INR 2.5 million.

     

    Indirect Taxes

    Goods and Services Tax (‘GST’)

    • The Finance Minister (FM’) has assured that drafting of the model GST legislation for Centre and State GST is under progress along with State Governments.
    • Structure of GST Network (GSTN’) has been approved by the Empowered Committee of State Finance Minsters. GSTN, implementing common PAN based registrations, returns filing, payment processing, will be operational by August 2012.

     

    Service Tax

    • Effective rate of service tax has been enhanced from 10.3% to 12.36% wef 1 April 2012.
    • Time limit for issuance of invoice under Point of Taxation Rules is proposed to be increased from 14 days of provision of service to 30 days of provision of service.
    • Continuous supply of service will include services provided on a recurrent basis under Point of Taxation rules.
    • Settlement commission provision introduced.
    • No monetary limit specified for service tax adjustments if the adjustments are not on account of interpretation of law, taxation, valuation, classification etc.
    • Receipt of consideration for export of services aligned with the time prescribed by RBI (including extended period allowed), for determining date of payment of tax.
    • Disputes on refund/ rebate in case of service export will now be referred to Revision Authority instead of Tribunal.
    • Commissioner is empowered to conduct special audit by engaging a Chartered Accountant or a Cost Accountant in certain circumstances.

     

    Negative List under service tax

    • The Finance Minister has proposed change in manner of levy of service tax by taxing services on negative list basis. Services mentioned in negative list or in exemption notification shall not be liable to service tax.
    • New definitions in the context of negative list based taxation introduced inter alia including negative list, taxable territory, services, renting, money, actionable claim, interest, person.
    • Under the earlier draft concept papers, advertisement in print was proposed to be covered under service tax net. However, negative list legislation continues to keep print industry outside the tax net.
    • Exemption is proposed on temporary transfer or permitting the use of copyright in cinematograph films in addition to currently exempted copyrights in original literary, dramatic, musical or artistic works. Copyright in sound recording shall continue to be taxable.
    • Exemption to copyright in cinematograph films likely to cover television programmes, theatrical or non-theatrical films etc.
    • Services by performing artists in folk or classical art forms of music, dance or theatre is proposed to be exempted.
    • Services provided to a recognised sports body by another recognised sports bodies or individual as player, coach referee, umpire etc for a tournament organised by such recognised sports body is proposed to be exempted from service tax. Further, sponsorships for tournaments organised by specified sports bodies is also proposed to be exempted from service tax.
    • Under earlier draft concept papers, admission into premises (including theatres, amusement parks etc) was proposed to be chargeable to service tax. However, admission to entertainment events or amusement facilities is proposed to be included in negative list and hence, not liable to service tax.
    • Selling of advertisement space and time on media other than radio or television has been considered to be a service under the negative list. Thus, it would need to analyse if advertisements in electronic medium (such as internet, telecommunication etc) or in outdoors will attract service tax.
    • Services of betting, gambling or lottery are included in the negative list and hence, shall be exempted from service tax.
    • The proposed negative list concept intends to define service’ for the first time under the service tax legislation. Service’ has been very broadly defined and includes declared services’. Such declared services’ deems temporary transfer of any Intellectual Property Right, works contract, construction, IT software, non compete, hiring, leasing or licensing of goods without right to use etc as services.

     

    Draft Place of Provision of Services Rules (‘POS Rules’)

    • Proposal to replace existing framework of identifying jurisdiction for levy of service tax through Export of Services Rules, 2005 and Taxation of Services (Provided from Outside India) Rules, 2006 with a common Place of Provision of Services Rules.
    • Guidance note on POS Rules has been issued to determine taxable territory’ for appropriate levy and collection of service tax. These Rules aim to identify a more consistent and efficient mechanism to collect service tax.
    • Generally, place of provision of services to be the location of service receiver’.

     

    Cenvat credit

    • Interest on wrong credit to apply only when the credit is utilised.

     

    Excise duty

    • Effective rate of excise duty enhanced from 10.3% to 12.36%, 5.15% to 6.18% and 1.03% to 2.06%.

     

    Customs duty

    • Effective rate of customs duty enhanced from 26.85% to 28.85.

     

    Central Sales Tax (‘CST’)

    • CST rate against declaration forms has been retained at 2%.

     

    Ernst & Young is a global leader in assurance, tax, transaction and advisory services. In India, it is located in 14 offices across 10 cities.

    You may refer to original document also at http://www.ey.com/Publication/vwLUAssets/Media-Tax-Alert/$FILE/Media-Tax-Alert.pdf

     

     

  • Five ways in which the government can make monies on the Budget and perhaps reduce duties

    Budget 2012 Anchor: 5 M&E ways in which the govt can make monies on the Budget

    By A N Chorrea

     

    Bizarre as these sound, given that the government appears to be in need of money if all the extra taxes are an indication, here are a few ideas which Pranabda may like to consider for his speech next year.

     

    1. Take a couple of breaks in the Budget speech. Ensure channels shell out 50 per cent of the revenues earned in these breaks to the government

    2. Since it’s a high ratings and readership game, suggest options for profit share to media organizations or just impose stiff charges for budget text document (instant delivery in various formats) and live video

    3. Run a contest on channels, newspapers and mobile phones where you can ask for Predict the Proposals. Those who guess it right, can get prizes as well as entry to the Budget speech. Ask mobile companies to part with revenues

    4. Democratize the Budget. Take views of the public on what to do with proposals. For instance, taxes on cigarette. Press A for 5 per cent, B for 10 per cent, C for 15 per cent and D for no change. Make money through SMS charge profit share

    5. In-speech placement. Shah Rukh’s gain is Saif Ali Khan’s loss. Rather than plug Ra One, Saif should’ve lobbied to ask for a mention of Agent Vinod. Would’ve worked wonders given the March 23 launch. Select in-speech brand placements could get big money (one shaayari in the form of song lyrics may also be allowed).

     

    A N Chorrea is a seasoned media-watcher who writes the MxMIndia anchors under a pseudonym

     

  • Reactions from select members of the media and allied sectors on the Union Budget

    Budget 2012: Reactions from Stakeholders

    Rakesh Jariwala, Partner & Tax Expert, M&E, Ernst & Young

     

    “The key takeaway from the Union Budget 2012 for the Media and Entertainment Sector (‘M&E’) is the exemption to be provided from service tax on Copyrights in Cinematographic films with the introduction of the negative list concept under the service tax legislation.  This exemption was not proposed in earlier drafts of the concept paper on negative list.  However, copyright in sound recording continues to be taxed.  Thus, it appears that copyright in theatrical as well as non-theatrical rights in cinematographic films will now remain outside the tax net.  It may however be noted that these changes will come into effect from the date when section 66B in proposed service tax law becomes effective.  In addition to this, concept papers to negative list sought to tax entry into premises (which included theaters for entertainment purposes) and hence, service tax could also apply on admissions liable to entertainment tax.  However, the proposed negative list legislation seeks to specifically exclude admission to entertainment events and access to amusement facilities, thereby granting a much needed relief to the entertainment industry.  Thus, for film industry, it is proposed that service tax will not apply on transactions between producer to distributor, distributor to exhibitor (by exempting copyrights in cinematographic films) and between exhibitor to cinema goer (by including admission to entertainment events in negative list).”

    Vinita Bali, Managing Director, Britannia

    “The Finance Minister has presented a mixed Budget with fundamentally positive steps in some areas, not enough in others & large concern areas like the projected fiscal deficit of 5.1%. A few of the positives include raising the plan outlay for agriculture by 18%, initiatives for R&D in agriculture, allocations for improving warehousing and storage facilities for agricultural produce. All of these, executed well and on time, will address the supply side on food and agriculture that will drive domestic demand and consumption, which is one of the key priority areas. Similarly, some of the specific measures to create maternal and child nutrition programs is an essential step in ensuring that the unacceptably high levels of malnutrition are addressed.”

    Mahesh Krishnan, VP-Home Appliances, Samsung India

    The benefits announced for key sectors like infrastructure, agriculture and education are bound to improve the overall economic scenario. However, the Budget does not bring any relief to the consumer electronics industry, which has been reeling under the impact of rising input costs and rupee depreciation in recent times. The rise in excise duty may lead to an increase in prices of consumer electronics products.

     

    Anurradha Prasad, President, AROI (Association of Radio Operators for India) and Chairperson cum Managing Director, BAG Network

    “Radio industry is the one medium which needs a lot of government support but, unfortunately it seems that the government is putting more pressure on the radio industry, this time by increasing the service tax from 10 to 12 per cent. This I believe is not the right thing to do however we also understand that right now the government is in a populist mode and that could be one of the reasons why the Budget did not focus much on reforms and certainly did not address the business of media or radio in particular.”

     

    Ajay Mitra, Managing Director, India and Middle East, World Gold Council

    Whilst there may be a very short-term impact to demand for gold as a result of this measure, we believe that in the longer-term, this increase (increase of customs duty on imports of gold from 2 to to 4%) will not substantially affect demand. The fundamental reasons for buying gold jewellery are unchanged. They are rooted in Indian culture and weddings. Investment demand is driven by the need to protect against inflation, ease of liquidity and the increasing use of gold as a monetized asset to secure loans.

     

    Ashish Hemrajani, Founder and CEO, Bigtree Entertainment ( BookMyShow.com)

    The service tax exemption on the entertainment industry is a very encouraging step. It would propel the industry towards bigger and better things. This move can also be viewed as a way to offer some respite to the previously challenging situation the industry faced due to heavy taxation.

     

    Dippak Khurana, CEO & Co-Founder, Vserv.mobi

    The exemption of duty on mobile phone parts is surely an ecosystem enabler as it will lower the market prices of phones which are being assembled in India. This will help us achieve not only last mile connectivity but will fuel growth of ancillary sectors such as mobile content development, mobile banking, mobile advertising etc Over all, the government realises the role that mobile devices have to play in enhancing and streamlining IT oriented citizen centric governance framework. This is reflected by two provisions in the government 1) creation of a mobile-based fertilizer management system that will provide end to-end information on movement of fertilisers and subsidies.  2) roll out Aadhaar tablet enabled payments for various government schemes in at least 50 districts within next 6 months.

     

    However, the increase in the service tax from 10% to 12% will adversely affect the masses as mobile phone bills will become higher. Barring this negative point, the rest of the provisions in the Budget are encouraging for the sector per se.

     

    http://pib.nic.in/newsite/erelease.aspx?relid=0

  • No sops on duties for set-top boxes and squeeze on adspend budgets given service tax hike are dampeners in Union Budget 2012

    Budget shows the finger to digitization

     

    By A Correspondent

     

    In the end, one hopes that the angel is in the details. On Day 3 of the annual Frames jamboree put up by industry body FICCI, one hoped that Finance Minister Pranab Mukherjee will announce sops for digitization. The broad proposals didn’t. And for once, one hopes that rather than find the devil, there’s an angel hidden out there.

     

    Okay, there are some nice things in there. Like sops early stage funding from Venture Capital companies to media companies. But the IBF director-finance Naresh Chahal’s outrage was understandable. The government – and infobroad secretary Uday Varma re-iterated it – is firm on the June 30 deadline for the four metros. “If India has to grow, digitization will be a vital ingredient for its growth and thus it is important that we be technologically updated. Digitization is here to stay and we need to embrace this change.” While set-top boxes may not have found favour, LED and LCD television panels and parts of mobile phone memory cards have been looked at favourably by Mr Mukherjee.

     

    So while the FM hasn’t made life tough by adding taxes, the fact that he didn’t cut or even totally drop duties on set-top boxes was a huge dampner. Doubtless, the economically weaker sections in the four metros of Kolkata, Chennai, Mumbai and New Delhi will be forced to cough up monies if they want to catch non-terrestrial entertainment.

     

    Meanwhile, Mr Rakesh Jariwala, Partner & Tax Expert, Media and Entertainment at leading consulting firm Ernst & Young said:  “The key takeaway from the Union Budget 2012 for the Media and Entertainment Sector (‘M&E’) is the exemption to be provided from service tax on Copyrights in Cinematographic films with the introduction of the negative list concept under the service tax legislation.”

     

    The non-inclusion of advertising in television and print in the negative list for service tax is also a dampner given that the levy has been increase from 10 to 12 per cent. This means that there will be a tighter squeeze on adspend budgets. While advertising on big ticket shows will not suffer, the small monies spent on digital, outdoor, radio and other experimental/BTL activities may take a hit given the 2 per cent additional squeeze.

     

    And then there’s an increase in excise duty too which will increase the burden on M&E professionals and corporates and with the easing of Income Tax slabs not quite balancing the increase in expenses elsewhere.

     

    However, the film industry and entertainment event organisers may find some benefit with the recommendations.”The proposed negative list legislation seeks to specifically exclude admission to entertainment events and access to amusement facilities, thereby granting a much needed relief to the entertainment industry,” Mr Jariwalla added. “For film industry, it is proposed that service tax will not apply on transactions between producer to distributor, distributor to exhibitor (by exempting copyrights in cinematographic films) and between exhibitor to cinema goer (by including admission to entertainment events in negative list),” he said.

     

    For entrepreneurs just getting into media and entertainment who were cold-shouldered by venture cap companies given the restrictions, the easing up of restrictions on funding should be a welcome move.

     

    Please refer to Microsite on Budget 2012 for the following stories which were uploaded on Saturday, March 17:

    Budget 2012: Ernst & Young Analysis of Direct & Indirect Tax proposals in M&E

    Budget 2012: What it means for India Inc

    Budget 2012: Reactions from Stakeholders

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  • Reactions on video from select members of the industry on the sidelines of Ficci-Frames 2012

    Budget 2012: Video reactions from trade

    [youtube width=”400″ height=”250″]http://www.youtube.com/watch?v=Cx39gg69K9o[/youtube]

    By Team MxMIndia

     

    At the sidelines of FICCI Frames 2012, where there was much talk about digitization from both the industry and the government, MxMIndia caught up with a few industry members to get their reactions on the Budget.

     

    Nachiket Pantvaidya, Executive Vice President & General Manager, Star Pravah

    To be very honest at this point in time we like to go by the market forces so we don’t expect subsidies from the government. What we do expect is some kind of support in nurturing local talent in providing a base for regional television to shoot and to propagate learning and education in the regional field. Honestly, I think this has to be done through market forces in sync with the government and not through a subsidy model.

     

    Naresh Chahal, Director-Finance, Indian Broadcasting Foundation

    There is no incentive or concession given to set top boxes for the broadcasting industry and the ministry has already issued a notification for digitization and the first sunset date is July 1. So we are not happy with the way the government has not given any concession. We were expecting 0 percent duty on set top boxes to get a set top box at a nominal cost.

     

    Raman Kalra, Director & Partner, Industry Leader- Media & Entertainment, IBM Global Business Services India

    Nothing much was expected from the Budget. There were some expectations though, like FDI will go up for digitization, maybe it will happen for cable, some tax relief, that hasn’t come through but industry has already accepted it. They don’t need these one or two things to go ahead on digitization. It’s moving very fast so it will happen.

     

    Ashok Mansukhani, Director, IndusInd Media & Communications Ltd

    The Budget doesn’t go into the cost to be borne by the government. The government calls digitization a public private partnership, in fact, the private sector will have to spend, the cable sector and the MSOs will have to spend. What we had asked for was that if we spend 40000 crore, we need to also be in a position to be able to get fiscal incentives, tax incentives, duty exemptions, unfortunately all has been denied.

     

    Ravi Mansukhani, Managing Director, IndusInd Media & Communications Ltd

    We are very disappointed, anywhere else if you look, government always helps towards digitalization. There is no infrastructure status, you are not getting any fiscal incentives, nor are you getting favourable interest rates from banks, so basically we are very disappointed because the entire burden of digitization has fallen on the MSO, on the cable sector and there’s going to be a lot of funding required and we are disappointed that there was nothing done on either duties or fiscal incentives.

     

    Amit Dev, Director CMAI & Head of Focus Group of Multimedia

    I strongly feel that government doesn’t take a step in a direction unless they see a significant addition of tax or money making to the exchequer through multiple secondary direct indirect ways. So if there is no mention this year that means it is not among the top ten priority issues of the government.