Post by bhumika on Jun 9, 2006 21:27:07 GMT 5.5
Service tax hike may hit media cos
February 28, 2006
India is currently in the throes of an entertainment revolution spawned by economic liberalisation and the subsequent advent of cable television. The players in the television entertainment industry can be classified into three-link chain.
First are the studios (including the animation studios), which comprise the hardware part of the industry, the second are the content providers and the third link comprises the distribution trolley's, which include the cable and satellite channels as well as the multiplex theatres.
India has about 105 m television homes with an estimated viewing population of over 450 m. Of these, nearly 59 m homes have cable connections.
Budget Measures
Service tax increased from 10% to 12%. Sale of space or time for advertisement service, excluding that in print media and that by broadcasting agency, brought under the service tax net.
• Sponsorship service, excluding sponsorship in relation to sports events, brought under the service tax net
• Sale of space for advertisement in print media left out of the ambit of service tax.
• Excise duty of 16% levied on set-top boxes and customs duty of 15% brought down to 'nil'.
Budget Impact
• The increase in service tax is a negative, as it would dent the profitability of media companies if not passed onto the consumer.
• Inclusion of sale of space or time for advertisement, excluding those mentioned above, implies that advertisement space or time sold by multiplexes/cinemas would now be taxed, which is a negative for players (e.g. INOX, PVR and Shringar) in this space. Also, 'if' (clarity awaited) advertisement time sold by radio broadcasters is brought under the tax net, then it is a negative for players like Entertainment Network (Radio Mirchi) and Mid-day (GO 92.5 FM).
• Tax on sponsorship service is a negative for event organizers (e.g. Zee, TV18, NDTV, ENIL) and sponsors, as it would lead to increased costs of hosting an event for the both the parties involved.
• Print media (e.g. HT Media, Jagran Prakashan) continues to remain out of the service tax net, which is a positive.
Sector Outlook
• The proposals in the current budget are largely unfavourable for the media sector as a whole. However, we remain confident of the prospects of the media sector going forward. Over the last few years, there has been a rise in the overall consumption levels of Indian consumers, which could be attributed to the strong economic growth and lower interest rates in the country that has led to higher disposable income. Further, the demographic profile of India also favours higher spends on entertainment. Thus, this could lead to the emergence of a huge consumer base for the various products and services (including entertainment).
• While the next propellant for the Indian television broadcasting industry would be Direct to Home (DTH), if were to take off on a larger scale, as it will open up an additional revenue stream in the form of subscriptions, new forms of entertainment/media platforms are also fast gathering acceptance in the country. Print media has been at the forefront in recent times with players vying for a share of the growing ad revenues market. Further, other forms of entertainment like movie multiplexes and radio have also managed to attract a fair share of the consumer wallet. We expect overall industry ad-revenues to improve with the economy showing strength. Moreover, with new sectors opening up like telecom, healthcare and insurance, adspend is likely to increase.
Budget over the years
Recorded audio compact discs removed from the purview of excise duty.
Peak customs duty reduced from 30% to 25%. service tax raised from 8% to 10%.
Service tax imposed on TV or radio programme production.
Service tax net to include Multi System Operators (MSO) apart from cable operators.
Service tax exemption removed on broadcasting service provided by cable operators.
Service tax on:
Broadcasting services to include charges recovered by broadcasting agencies from MSOs and provision of DTH signals to customers.
Sound recording to include recording of sound on any media and includes post-production services such as sound mixing or re-mixing.
Video-tape production to include recording of any programme, event of function on any media and includes post production services
February 28, 2006
India is currently in the throes of an entertainment revolution spawned by economic liberalisation and the subsequent advent of cable television. The players in the television entertainment industry can be classified into three-link chain.
First are the studios (including the animation studios), which comprise the hardware part of the industry, the second are the content providers and the third link comprises the distribution trolley's, which include the cable and satellite channels as well as the multiplex theatres.
India has about 105 m television homes with an estimated viewing population of over 450 m. Of these, nearly 59 m homes have cable connections.
Budget Measures
Service tax increased from 10% to 12%. Sale of space or time for advertisement service, excluding that in print media and that by broadcasting agency, brought under the service tax net.
• Sponsorship service, excluding sponsorship in relation to sports events, brought under the service tax net
• Sale of space for advertisement in print media left out of the ambit of service tax.
• Excise duty of 16% levied on set-top boxes and customs duty of 15% brought down to 'nil'.
Budget Impact
• The increase in service tax is a negative, as it would dent the profitability of media companies if not passed onto the consumer.
• Inclusion of sale of space or time for advertisement, excluding those mentioned above, implies that advertisement space or time sold by multiplexes/cinemas would now be taxed, which is a negative for players (e.g. INOX, PVR and Shringar) in this space. Also, 'if' (clarity awaited) advertisement time sold by radio broadcasters is brought under the tax net, then it is a negative for players like Entertainment Network (Radio Mirchi) and Mid-day (GO 92.5 FM).
• Tax on sponsorship service is a negative for event organizers (e.g. Zee, TV18, NDTV, ENIL) and sponsors, as it would lead to increased costs of hosting an event for the both the parties involved.
• Print media (e.g. HT Media, Jagran Prakashan) continues to remain out of the service tax net, which is a positive.
Sector Outlook
• The proposals in the current budget are largely unfavourable for the media sector as a whole. However, we remain confident of the prospects of the media sector going forward. Over the last few years, there has been a rise in the overall consumption levels of Indian consumers, which could be attributed to the strong economic growth and lower interest rates in the country that has led to higher disposable income. Further, the demographic profile of India also favours higher spends on entertainment. Thus, this could lead to the emergence of a huge consumer base for the various products and services (including entertainment).
• While the next propellant for the Indian television broadcasting industry would be Direct to Home (DTH), if were to take off on a larger scale, as it will open up an additional revenue stream in the form of subscriptions, new forms of entertainment/media platforms are also fast gathering acceptance in the country. Print media has been at the forefront in recent times with players vying for a share of the growing ad revenues market. Further, other forms of entertainment like movie multiplexes and radio have also managed to attract a fair share of the consumer wallet. We expect overall industry ad-revenues to improve with the economy showing strength. Moreover, with new sectors opening up like telecom, healthcare and insurance, adspend is likely to increase.
Budget over the years
Recorded audio compact discs removed from the purview of excise duty.
Peak customs duty reduced from 30% to 25%. service tax raised from 8% to 10%.
Service tax imposed on TV or radio programme production.
Service tax net to include Multi System Operators (MSO) apart from cable operators.
Service tax exemption removed on broadcasting service provided by cable operators.
Service tax on:
Broadcasting services to include charges recovered by broadcasting agencies from MSOs and provision of DTH signals to customers.
Sound recording to include recording of sound on any media and includes post-production services such as sound mixing or re-mixing.
Video-tape production to include recording of any programme, event of function on any media and includes post production services