ITV

Category: Financials

  • Greater Boost to e-governance, new scheme for software export industry

     

     

    NEW DELHI: The Government today announced its proposal to enhance the allocation for e-governance from Rs. 395 crore in the year 2006-07 to Rs. 719 crore in 2007-2008.

    Presenting the Budget proposals in the Lok Sabha today, Finance Minister P. Chidambaram said the Government had launched an ambitious programme for e-governance with the objective of improving efficiency, convenience, accessibility and transparency in Government functions and take Government services to the common citizen. He said the Central Government supports e-governance action plan at State levels and therefore it was proposed to increase the allocation for such support from Rs. 300 crore in 2006-07 to Rs. 500 crore in 2007-08.

     

    The Minister also proposed to provide Rs. 33 crore for a new scheme of manpower development for the software export industry.

     

    Mr Chidambaram noted that e-filing of corporate returns introduced this financial year had been a resounding success and until January 31, 2007, 301,736 returns were electronically filed by corporates. The Ministry’s analysis showed that ‘the effective rate of tax paid by all corporates, thanks to numerous tax concessions and exemptions – several of them well-intended – was only 19.2 per cent’. He therefore decided to extend Minimum Alternate Tax (MAT) to income in respect of which deduction is claimed under sections 10A and 10B of the Income Tax Act.

    MAT had been introduced in 1996-97 for companies with book profits, and its purpose was to bring about horizontal equity in taxation.

     

    Extending service tax to renting of immovable property for use in commerce or business, the Minister excluded residential properties and land for entertainment.

     

    While bidding goodbye to 200,000 assesses through service tax proposals, the Minister said he proposed to bring new assesses into the fold by extending service tax to fields like the Development and supply of content for use in telecom and advertising purposes; asset management services provided by individuals; and

    Design services.

     

    The Empowered Committee of State Finance Ministers had agreed to work with the Central Government to prepare a roadmap for introducing a national level Goods and Services Tax (GST) with effect from April 1, 2010.

     

    Keeping in mind the special needs of several sectors and the interest of the consumers, the Minister mooted a proposal to raise the exemption limit for small scale industry (SSI) from Rs.1 crore to Rs. 1.5 crore. The exemption limit for small service providers was being increased from Rs. 400,000 to Rs. 800,000. While noting that this will mean 200,000 assesses out of a total of 400,000 assesses will go out of the service tax net, he said he was happy to give away the revenue loss of Rs. 800 crore in the interest of the small service provider and the consumer.

     

    The Minister said the telecommunications industry had repeatedly requested that the multifarious taxes, charges and fees applicable to the industry should be unified and a single levy on revenue should be collected. He had accepted this proposal and proposed to request the Department of Telecommunications to constitute a committee to study the present structure of levies and make suitable recommendations to Government.

     

    He proposed to exempt from service tax all services provided by technology business incubators to encourage innovation. Similarly, their incubatees whose annual business turnover does not exceed Rs. 50 lakhs will be exempt from service tax for the first three years.

     

     

    As a measure to encourage small and medium enterprises to invest and grow, the Minister said the surcharge on income tax will be removed on all firms and companies with a taxable income of Rs. One crore or less, benefiting about 1,200,000 firms and companies.

     

    Since VAT (Value Added Tax) had proved to be an unqualified success and VAT revenues of the implementing States increased by 13.8 per cent in 2005-06 and by 24.3 per cent in the first nine months of 2006-07, the next logical step was to phase out Central Sales Tax (CST) and the Central Government had reached an agreement with State Governments in this regard. Consequently, the CST rate will be reduced from 4 per cent to 3 per cent with effect from April 1, 2007 and Rs. 5,495 crore had been provided for compensation for losses, if any, on account of VAT and also on account of CST.

     

    Noting that venture capital funds were a useful source of risk capital for start-up ventures in the knowledge-intensive sectors, the Minister said it was necessary to limit the tax benefit to investments made in truly deserving sectors. He therefore announced that among other industries, information technology relating to hardware and software development would be given pass-through status to venture capital funds only in respect of investments in venture capital undertakings.

  • Ficci faults increase in indirect taxes as wrong signal to corporates

     
     

    NEW DELHI: The president of Ficci, H Khorakiwala, I congratulated the finance minister’s “terrific budget” on the social sector front, but said he has lost an opportunity due to the indirect taxes imposed, which has given a wrong signal to the corporate world.

    He specially lauded increased spendings on health, education and agriculture, and also the GDP spending that has been raised.

    He said however that the corporate sector is not happy with the indirect and direct tax burdens, especially various instances of multiple taxation, and it would have been better had he taken measures to ensure keeping the growth rate at 9.2 per cent.

    Responding to a question, he refused to term this as an anti-growth budget, stressing that not that there will be no growth, but it would have been better had he taken this opportunity.

    He also said that the inclusive economic development is sustainable in the long term.

    There will be somewhat retardation in the IT sector due to the taxes imposed and this is a disappointment for the sector.

    Ficci Secretary General Dr Amit Mitra further clarified the body’s stand, saying that it is not as if the 9 per cent growth rate will slow down, because that has happened due to the private sector and corporates, as well as public participation, but the industry had expected something in the budget that would perhaps push the growth rate beyond what is there now, to 10 per cent.

    “That is an opportunity that the finance minister has missed and this is disappointing,” he said.

    Specifically on the IT sector, Mitra held the imposition of MAT is “too premature. The government could have done this when the IT industry would turn more mature, when we started dealing with imbedded technologies, rather than the preliminary technology we are dealing with now.

    He also said that the tax on stock options for employees is also a deterrent for the industry.

    “The government could have lowered taxes and asked for better collection and that would have helped industry, since the minister admitted that tax collection has increased. Instead, he imposed taxes, which is not the right thing.

    However, he said that the reduction of the fiscal deficit, “for the first time in 25 years, will help curb inflation, added with the benefits that the farm sector has been given, which lies at the core of inflation.

  • Digitalisation of films can help end piracy, save foreign exchange
     

    NEW DELHI: Digitalization of cinema is vital in controlling the distribution and exhibition of cinema in digital format and safeguarding intellectual property since the Indian film industry faces almost 40 per cent revenue pilferage due to piracy, according to a Planning Commission study.

    The sub-group on ‘Going Digital’ set up by the Planning Commission and headed by Rajeeva Ratna Shah, member secretary in the Planning Commission and a former CEO of Prasar Bharati,, said in its report that going digital would be incomplete if the entertainment (film) sector is not covered. Furthermore, safeguarding the intellectual property rights of the industry would encourage filmmaker to a great extent. The digital cinema system is already a reality in the country and would revolutionize the exhibition of films all over India.

    Issues of piracy plague software industry the world over. In terms of money, the industry loses approximately Rs 20 billion on account of piracy directly, on which the government neither earns Entertainment Tax nor Income Tax. digital cinema would help curb piracy in a proactive manner as it will make the pirates business unviable by providing an early and widespread release of films across the country and thus nipping piracy in the bud. Furthermore, as there is no physical movement of the film, creation of pirated copies/versions of the film is ruled out.
     

    The sub-group said the early availability of films combined with high quality images and scheduling flexibility ensure increased box office collections. Early migrants to the digital cinema system have witnessed around 100 per cent increase in revenue collections by way of increased box office collections and thus increased collection of Entertainment Tax and Income Tax.

    It said film prints are made from film stock imported from companies like Kodak, Agfa etc. Going by an average of 800 films, 200 prints each at a cost of Rs.50,000 per print entails an expense of Rs 8 billion. As the prints cannot be recycled, it is a waste of money once it completes its life. However, digital cinema does not use any prints, hence minimizing wastage and at the same time saving the country precious foreign exchange.

    With the advent of Digital Cinema, niche cinema and regional language films will be able to generate revenues, thus making the local film industry in the states more commercially viable. This will provide employment to local artistes and technicians and other film industry related infrastructural suppliers.
     

    Analogue prints are made from polyester and are destroyed by burning which is a huge biohazard. Digital prints are digital files and can be simply erased from the server’s memory. The Power consumption of a digital projection system is far more economical as compared to the power consumption of an optical projection system. The annual power savings if digital cinema is implemented in around 200 theatres across the country works out to 87,48,000 KVA.

    The print quality does not deteriorate with repeated use irrespective of the number of screenings. Small town cinemas plagued by piracy and failure of films coupled with availability of only old films have become economically unviable. However digital cinema will bring the small town cinemas at par to the cinema halls in the big cities as the films can be simultaneously released across the country. The advent of digital cinema has seen proliferation of new and compact cinema houses in small towns and cities.

    But the Sub-group said the government should provide incentives for production as well as exhibition of films in the digital format in its own interest as the loss of revenue due to piracy is considerable. Production of cinema in digital format could be on lower tax regime and theatres that have installed digital cinema exhibition facilities can be subjected to lower entertainment tax.

    Furthermore, there is need to amend the Cinematograph Act 1952 to incorporate digital cinema. digital rights management/IPR protection is of paramount importance in view of piracy. Many content owners would be apprehensive in sharing their content as piracy is a major issue. Hence, adequate laws to protect the rights of the content owners need to be put in place so that they feel safe to share their content over digital platforms.

    As small and medium players would find it difficult to digitize their respective libraries in the light of huge conversion cost, content aggregators could be encouraged and a suitable regulatory/policy regime worked out to make this happen in a hassle free manner.

  • Rationalise excise duty, Vat on TV, STBs: Planning Commission
     

    NEW DELHI: Acknowledging that the major hurdle in digitization presently is the absence of digital receiver sets and the fact that about 45 per cent TV sets are Black and White, a sub-group of the Planning Commission has recommended rationalization of the total taxation level to 12 per cent.

    The sub-group on ‘Going Digital’ set up by the Planning Commission and headed by Rajeeva Ratna Shah, member secretary in the Planning Commission and a former CEO of Prasar Bharati, said this will mean the excise duty on digital TV set, set top boxes (STBs) and its inputs be rationalized to 8 per cent and there should be a state VAT of 4 per cent. This will give impetus to the indigenous STB industry, which would generate economic activity and employment in the country.
     

    The sub-group noted that STBs and the digital Conditional Access System (Cas) act as a catalyst for implementation of digitization. The Consumer Electronics and TV Manufacturing Association (Cetma) has indicated that the cost increase in case of a TV set, capable of receiving digital terrestrial signal in addition to analogue signal would be about Rs 1000 from the existing prices. For the existing analogue TV sets, which are expected to be around 120 million by year 2010, the consumers would need to have Digital Terrestrial Transmission STB to receive the signals. The cost of STB is presently about Rs 2250 and is decreasing every year by 7 to 8 per cent. 

    The industry would require a lead time of six months to meet the demand for the digital TV sets and radio receivers. Similarly, the industry would be in a position to provide STBs in about 16 to 20 weeks from the time the government decides to change over to digital broadcasting.
     

    “But for successful rollout, the government needs to firm up the transition path and announce timelines so that all the stake holders could put their acts together and make the transition as smooth and successful as possible. The success of DTT depends upon the availability of requisite consumer end equipment and introduction of STB coupled with Cas.”

    The sub-group added that India was a price sensitive market and one solution or product fits all cases is not commensurate with consumer thinking. Hence there may be need to introduce various models of STBs (having digital to analogue converter with addressability of channels with Cas to high-end models) with increasing value added features to meet the requirements of the consumers. The requisite standards need to be put in place for this. 

    Out of 61 million households cable connections all over India , 35 per cent are in rural areas. This service is easily available and affordable in the rural areas. This industry is geared up to meet the challenge of digital broadcasting, the sub-group noted. 

    At present, the signals from uplink station to satellite and from satellite to cable TV head-end are already digital. The signal from cable TV head-end to subscriber is both in digital and analog format. Most of the multi-service operators (MSOs) in the metros and big cities have already gone digital. Thus, only 7000 head-ends required to go digital.
    Furthermore, all franchisees are not affected by digitization as they only pass the signal (analog/digital) received from the head-end to the subscribers and do not process the signal. Digitization of subscribers end depends on introduction of digital TV in the market at affordable prices and immediate digitalization of cable TV head-end. 

    To further galvanize the rollout, all the content producers – Prasar Bharati as well as private operators – should provide agreed and identified channels in the digital/HDTV format to MSO/cable operators under the “Must Carry” clause. 

    Going digital encompasses digital broadcasting, telecom as well as other technologies for access and backbone networks which deploy digital systems. While some of the frequency bands used for broadcasting have exclusive allocations for ‘broadcasting’, most of the bands are shared with other services. 

    For example, the 800/ 900 MHz bands used for cellular services – GSM & CDMA, etc. are available for broadcasting also. The satellite based TV broadcasting is mostly in the frequency bands, which are shared with microwave systems. Hence, while evolving/ modifying the NFAP (National Frequency Allocation Plan), the relative national priorities of various spectrum based services have to be taken into account.

    Normally digital transmissions require larger bandwidth. However, with modern compression techniques, which are improving continuously, it is now possible to accommodate multiple channels in the RF bandwidth of a single existing (analogue) channel. Hence, on complete transition to digital systems in broadcasting, the spectrum requirements should reduce or alternatively, it would be possible to transmit larger number of channels in the bandwidth occupied by existing channels. 

    During the transition phase, existing analogue and new digital systems would need to be broadcast together, requiring larger spectrum bandwidth. The requirements can be assessed once the number of channels for simultaneous transmission is worked out. With digital broadcasting, it is possible to include data, Internet, etc. within the broadcasting channels. 

    During the migration from Analogue to Digital Radio, new frequency assignments have to be identified to facilitate smooth migration and for some time both the existing analogue transmissions as well as new digital transmissions would continue. Hence, there will be spectrum constraint during this transition phase. Also, the spectrum for digital migration may need to be identified for both Prasar Bharati as well as Private FM Broadcasters. 

    The sub-group, comprising 17 members, was set up by the Committee on Information, Communication and Entertainment (ICE) that has been examining the larger issue of convergence and advent of modern technology. Members include the secretaries in Information and Broadcasting and Department of Telecommunications, the Prasar Bharati CEO, the presidents of Cetma, Mait, Nasscom, and ISP Association of India, co-chairman of the Ficci entertainment committee Kunal Dasgupta, chairman of the CII entertainment committee, chairman of the Film & Television Producers Guild of India, president of the Cable TV Operators Association, Rajiv Mehrotra who is the managing trustee of the Public Service Broadcasting Trust, Virat Bhatia from AT&T Communications Services, Zee Telefilms President Abhijit Saxena, Sameer Rao who is vice-president in charge of strategy, planning & regulatory in Star India, and a representative of the Prime Minister’s Office.

  • IBF demands tax holiday, level playing field with print and telecom sectors

     
     

    NEW DELHI: The Indian Broadcasting Federation has sent several pre-budget demands to the ministry of finance, including the expansion of the definition of Industrial Undertaking under Section 72A of the Income Tax Act, 1961 to include electronic media i.e. TV broadcasting, as well as exemption of cess charges and additional duty on STBs.

    It has also demanded that for the next 10 years, the government must reduce the base for Fringe Benefit Tax (FBT) from 20 per cent to five per cent for the industry, as in the case of computer software industry, a senior official at IBF told indiantelevision.com.

    The IBF recommendations say that for the next 10 years, the government should exempt CVD, cess charges and additional duty on STBs to ensure that customers get STBs at reasonable prices.

    The Excise Duty should be zero to encourage indigenous production of STBs.

    The Customs and Excise Duties on all the other broadcasting equipment should be kept at par with the IT equipment, the IBF has demanded, seeking a level playing field for the electronic and print media.

    “We strongly recommend that the Government of India should exempt broadcasting industry from Service Tax as in the case of print media.

    The IBF reasons that Section 72A of the Income Tax Act, 1961, provides an incentive to robust companies to take over and amalgamate with the companies which would otherwise become a burden on the economy.

    The basic objective of Section 72A was to revive the financially weak businesses and synergise the business to achieve better growth, better profits, recovery of bad advances by banks and institutions, which will result in higher tax revenues, increase in employment ultimately leading to contribution to the economy.

    Section 72A of the Income Tax Act, 1961, defines the term Industrial Undertaking but does not seem to cover Broadcasting Industry.

    IBF feels that when this definition was introduced, industry was in a nascent stage and probably that is the reason it was not included in the definition of the ‘industrial undertaking’ though the print media does get covered under this definition.

    “We therefore request to favourably consider the matter and expand the definition of the term Industrial Undertaking to include the broadcasting industry,” the document said.

    “There are 112 million television homes in India and more than 68 million homes are connected to cable TV and these are increasing rapidly,” says the report in its preamble, arguing that .forr the majority of Indians, including the poor and non-educated people, television is the cheapest source of information and entertainment.

    According to the document, the industry produces approximately 6,00,000 hours of original programming annually for more than 300 TV channels, making it one of the biggest in the world.

    There are over 50 million viewers of Indian TV programming in neighboring countries and overseas creating a positive international image of India unlike any other media, the document asserts.

    It argued also that the TV channels spread a sense of unity and integrity in the country, as witnessed during Kargil War, Gujarat earthquake, the terrorist attack on the Parliament on December 13, 2001, the 2004 tsunami tragedy, and the most recent train blasts in Mumbai.

    On the issue of FBT too, the IBF has taken a strong stand of being discriminated against vis-?-vis other industries.

    “The Finance Act 2005 has considered 20% of the total expenditure under certain heads as being subjected to Fringe Benefit Tax (FBT).

    “However, in industries such as pharmaceuticals, computer software industry, hotel industry etc., the value of fringe benefits for the purposes of computation of tax is taken at the rate of 5 per cent, which is a clear discrimination against television broadcasting industry,” the official said, quoting the IBF document.

    Explaining the nature of the industry, especially news channels, the document says that this involves extensive communication (telephone/mobiles) and use of vehicles for carrying performers, technicians, panelists, politicians and audiences and other celebrities who appear on the channels frequently.

    The news channels have to depute OB vans, cameramen and reporters for out door coverage of events and activities. The telephone also has to be used excessively.

    (Telephone charges as part of the salary paid for by the company to employees comes under the mischief of FBT, hence the demand for the reduction of FBT base from 20 to five per cent)

    the IBF has also claimed a level playing field vis-?-vis the IT industry in terms of benefits and concessions with regard to Customs and Excise Duties.

    “The Central Government, in the Ministry of Telecom and IT have amended the Trai Act and through Notification dated 9th January, 2004, the scope of the definition ‘telecommunication services’ has been expanded to include the ‘broadcasting and cable services’ also.

    “Thus, for all purposes, broadcasting and cable services are now telecommunication services,” the document delineates, hence the demand for being treated at par with the IT industry, so far as excise and customs are concerned.

    Therefore, the incentives/concessions granted to the IT sector, should be ipso-facto extended to broadcasting/cable services also and this may find a mention in all relevant notifications/circulars.

    “For example, as of now, Customs Duty+CVD+Cess for broadcast equipment is 36.64 per cent, whereas it is only 21.32 per cent for computers and four per cent for cellphones,” the document says.

    “Now in the convergence era the same STB / modem can be used for cable, DTH, IPTV and even cellphones. Therefore, Customs Duty on broadcast equipments should be at par with the IT Industry.

    IBF says also that Customs Duty on STBs was reduced to zero per cent in 2005, however CVD, Cess charges and additional duty comes to 21.32 per cent

    “In the interest of millions of TV households, the Government should exempt CVD, Cess charges and additional duty on STBs for next 10 years,” it has told the Finance Ministry, adding that in order to promote indigenous production, Excise Duty may also be exempted for a period of 10 years.

    The private Indian broadcasting Industry started only in 1992, and is still in a nascent stage.

    To meet the demands of the people, a large number of new TV channels are being launched and many of them have not been able to reach profit-making stage, explains IBF.

    The Industry is, therefore, not in a position to take the burden of Service Tax.

    The IBF document gives a detailed account of revenue and tax burden of the broadcasting industry last fuscal:

    The Total Electronic Media Advertising Revenue – Rs. 6,100 Crs. Prasar Bharti Advertising Revenue – Rs. 960 Crs.
    Private Channels Advertising Revenue – Rs. 5,140 Crs.

    Total Service Tax @ 12.24% on Rs. 6,100 Crs. – Rs. 747 Crs. 

    Service Tax Liability of Prasar Bharti – Rs. 118 Crs.
    Service Tax Liability of Other Channels – Rs. 629 Crs.

    Though service tax is levied on broadcasting media, print media is not attracting service tax even though it enjoys a larger share of advertising revenue.

    Total Estimated Advt. revenue (F.Y. 05-06) Rs. 13,300 Crs. (approx.)
    Print Media Rs. 7,200 Crs. (54%)

    Electronic Media Rs. 6,100 Crs. (46%)

    “Further, just like a page of the newspaper, the television screen is only a carrier of programmes and the broadcasting media should also, therefore, be exempted from Service Tax,” IBF has argued.

    In fact, IBF has pointed out the advantage of its medium vis-?-vis the print medium, saying that television industry is one step ahead of print media in providing information and education to the illiterates.

    It says that for the illiterate persons, visuals and the spoken word carry the education and information where the written word fails. In fact, the broadcast media is the only means to reach the illiterates which constitute 40% of our adult population and a significant number of youngsters, says IBF.

    “We would like to, therefore, highlight this discrimination against broadcasting media which has not been removed in spite of our repeated representations,” IBF has asserted in its memorandum.

    The IBF feels that news and current affairs channels do yeomen service to the nation and all are free-to-air, whose only source of revenue is advertisement.

    These require huge investments in infrastructure, human resource, etc.

    There are already more than 35 news channels and more are being launched every month, leading to scramble for the limited ad revenue pie. Service Tax on these channels therefore slowly lead to their deaths, IBF says.

    Ad spend to GDP ratio for India is one of the lowest at 0.34 per cent.

    It is 1.3 pet cent for USA, 1.0 per cent for Australia and even our neighbouring countries in South East Asia like Malaysia, South Korea, Singapore etc enjoy a high ratio of 0.8 to 1.0 per cent, IBF has shown in re document.

    While this indicates the potential available, but without government’s support like Service Tax holiday on advertisement revenue, the potential cannot be exploited to desired extent

    IBF has also argued that Service Tax pulls down consumption and hence economic growth. Lower consumption means lower overall tax revenues.

    “Service Tax is an unfair disadvantage for new Indian and foreign investors,” IBF has said.

    The Central Government vide Notification 6/2005 dated March 1, 2005 has granted an exemption to the service providers (small cable operators) whose aggregate value of taxable service for a financial year does not exceed Rupees Four Lakhs.

    Subscription revenue forms a significant portion of the revenue earned by any broadcasting company/agency and contributes to defraying the huge expense incurred on providing high quality content to the C&S viewing population.

    “It would be appreciated that the position adopted by cable operators (of not paying the service tax to the Broadcasters for service received by them) is causing irreparable harm to the operations of broadcasting fraternity; and is indeed causing revenue leakage to the government,” IBF says.

  • Zee Turner: Budget should stop double taxation from broadcasters
     

    NEW DELHI: Broadcasters have expressed the hope that the government will ease the taxation structure for the initial three to five years and introduces policies that promote domestic manufacturing of set top boxes because the high import duty and taxes like octroi and other taxes were acting as a bottleneck in smooth transition to digitalisation.

    Zee Turner CEO Arun Poddar told indiantelevision.com today that irrational rates were dissuading Indian entrepreneurs from investing in the production of STBs. He hoped the government would introduce policies that promote domestic manufacturing of STBs.

    Listing his expectations from Union Budget 2007-08 being presented on 28 February, Poddar appealed for doing away with double taxation from broadcasters. He said since media was part of the entertainment as well as a service industry, broadcasters were charged both entertainment tax and service tax.
     

    He said the entertainment industry was in the transition mode from analogue to digital and it was extremely imperative for the government to take steps that not only accelerate the process but also make this industry an interesting and appealing investment proposition for Indian manufacturers.

    Service tax remained one of the crucial and unresolved issues in the entertainment industry and should be sorted out in the forthcoming Union budget. While service tax is levied on the electronic media, the print media is exempted from any such taxation. This is despite the fact that both print and electronic fall under media and entertainment industry. There was therefore need to create a level playing field for all, and take measures to bring electronic at par with print media.
     

    “The 400,000 exemption limit from service tax has led to ‘appalling confusion and dissatisfaction’. While the last mile cable operators are able to take undue advantage of this exemption limit, multi system operators (MSOs) and broadcasters were being penalized,” Poddar said. The last mile cable operators conveniently avoid passing the service tax to MSOs by under declaring their subscriber base by almost 80 to 85 per cent. MSOs and broadcasters paid service tax but could not recover this from the last mile operators.

    He expressed the hope that the government would bring about clarity on how service tax should be charged or should waive the exemption limit completely.

  • Trai pitches for duty slash on STB components, seeks removal of entertainment tax on cable TV

     
     

    NEW DELHI: The Telecom Regulatory Authority of India (Trai) has take up the demands of stakeholders in the broadcasting industry and recommended to the Finance Ministry that there is a need for tax rationalisation. The chief amongst which is abolishing of customs duty on import of components for the local manufacture of STBs.

    MSO sources tell indiantelevison.com that Trai has suggested to the ministry that it should ensure a level playing field in the interest of digitalisation of cable television, which has seen increased demand after the rollout of Cas.

    For the benefit of the consumers, Trai has also suggested that Entertainment Tax be abolished from the cable TV sector.
     

    Trai has argued, as the MSOs had desired, that this is the only industry in which both service tax and entertainment tax are levied, the latter going to the state governments, and suggested that instead of the extra entertainment tax burden, there should be evolved a system of sharing a part of the service tax with the state governments.

    These sources say also that Trai has for the first time written to the government of the reports the industry has been filing since the middle of January this year, that after Cas rollout, the interest in digitalised TV has vastly increased, and Trai says that there are requests from areas not covered under mandatory Cas for the same system being introduced.

    The issues were discussed in a roundtable between Trai, the MSOs and other stakeholders earlier this month.

    Trai has written to the government, sources requesting anonymity tell indiantelevision.com, that the stakeholders desire rationalisation of tax structure, because greater convergence in broadcast and telecommunication technologies in the near future would result in the distinction between the two services getting increasingly blurred.
     

    Hence the need for a level playing field, which in turn could not be brought about without required rationalisation of taxation in the two sectors.

    Trai feels that the current additional customs duty of 4 per cent on components of set top boxes and associated items like viewing cards should be abolished, just as has been done for the components and parts of cellular phones and mobile phones.

    The Trai wishlist sent to the MoF, sources say, recommends the complete removal of basic customs duty on imported digital headend equipment from the present 12.5 per cent, to improve penetration in the country as a whole.

    Trai says this is quite in line with the abolition of duty on import of STBs done in 2006.

    The MSOs say that they had desired that though excise duty is currently levied on the transaction value of STBs, which are sold as packaged commodity, in the same manner as mobile phones, televisions and cameras, but wherever required manufacturers may be given the option for the scheme on which excise duty is levied on the basis of MRP, with an abatement of 40 per cent.

    Presently, this is applicable to other packaged commodities, and Trai has sent this as part of the recommendation to the ministry as well.

    In consonance with the wishes of the MSOs and other stakeholders, Trai has also suggested that the telecom department has demanded reduction of excise duty on telecom equipment to 8 per cent, and this same should be applicable to manufacture of STBs.

    The stakeholders had told Trai that this would be necessary because with greater convergence of technologies, it would be tough to distinguish between the services.

    There is another tricky issue on excise duty. MSOs say that the premises of the subscriber where the set top box is deployed should be treated as the extended premises of the service provider and the STBs at the premises of the subscriber be treated as the possession of the service provider.

    This would enable them to avail a set-off of excise duty paid, against its service tax liability.

  • CII moots 5% customs duty on imported STBs in bid to boost local manufacture

     
     

    NEW DELHI: While demanding various reductions and exemptions of taxes and duties that would be beneficial for the media and broadcasting industry in general, the Confederation of Indian Industry (CII) has demanded a hike in customs duty on STBs from the present nil to 5 per cent.

    The CII has demanded exemptions and tax burden relief on capital goods import and other issues, especially those meant for infrastructure development, creation of intellectual property and import of colour TV and picture tubes.

    Yet, so far as STBs are concerned, the CII says that whereas in the present situation, import of STBs do not attract any customs duty, this should be raised to five per cent in the budget for 2007.
     

    The CII, in its document “Pre-Budget Memorandum” gives its own arguments on that count.

    It says: “Excise Duty on STBs was exempted on 24th June 2003 to facilitate introduction of Conditional Access System in the country. In the budget 2006, the exemption on excise duty was withdrawn but customs duty was reduced from 15 per cent to Nil. However, there was no corresponding reduction of customs duty on inputs used in the manufacturing of STBs. This has resulted into another case of inverted customs duty structure.

    “The correction of the anomaly can be achieved either the by reduction of customs duty on inputs required for manufacturing of STBs to Nil, or increasing of customs duty on the import of STBs from Nil to 5 per cent, and also allowing import of inputs at five per cent.”

    A senior tax consultant told indiantelevision.com that the measure would benefit local manufacture of STBs, as the customs duty on import of boxes and import of input components would be the same, whereas previously, there was no customs duty on import to STBs.
     

    Currently, MSOs are importing STBs mainly from China and Korea.

    “This is a pro-local manufacturing and necessary corrective measure from an earlier skewed customs regime so far as STBs are concerned,” he explained.

    The CII recommendation says that the second option is preferable.

    It says also: “In case it is felt that it would increase the price of imported STBs, then excise duty can be reduced from 16 per cent to 12 per cent on STBs as well as its major imported inputs.

    Meanwhile, there are many general recommendations of the CII that would benefit the industry.

    It has specifically suggested that the customs duty on glass parts of the colour picture tubes for TV sets should be reduced from 12.5 per cent to five per cent.

    It has argued here that the Free Trade Agreement between India and Thailand has a list of goods covered by the Early Harvest Scheme and includes CTV and colour picture tubes.

    “Consequently, customs duty on CTV (8528 12) and CPT (8540 11) imported from Thailand was reduced to 12 per cent on September 2004, and to 6.25 per cent on September 1, 2005. The impact of (this) reduction has resulted in tremendous increase of imports (from Thailand).

    On the telecom sector the CII has recommended that there should be a reduction of customs duty to five per cent on capital goods required for manufacture of telecommunication equipment covered by the IT agreement.

    It also wants to extend the present “Nil” customs concession to inputs for the manufacture of components / sub assemblies duty under serial number 239 of customs notification 21/2002.

    Across the board, CII has recommended measures that will benefit industry as a whole and consequently the media and broadcasting industry. It has, for instance, recommended reduction of CENVAT rate of 16 per cent to 14 per cent in the budget 2007, and has also said that the service tax of 12 per cent must not be increased.

    On the issue of infrastructure development CII has suggested that the government may consider more loans from international institutions.

    “Gross Capital Formation in infrastructure must be progressively raised from 4.5 per cent of GDP to 11 per cent,” the report of CII says.

    In general, all companies and employees may stand to benefit also if the CII recommendation of abolishing of Fringe Benefit Tax (FBT), in consonance with the desires of business as a whole, ever since the tax was slapped vide the Finance Act 2005.

    It outlines the alternative thus:

    “Either the tax should be abolished or the choice be given to tax paying firms to pay one per cent additional corporate tax on its total income in lieu of FBT. Otherwise the corporate could chose to remain under FBT. If this is not possible, the CII proposes levy of FBT only on elements of personal benefit to employees, and exclusion of deeming provision of treating a portion of pure business expenses as personal expenses.”

    The CII recommendation on depreciation would also benefit the media and broadcasting industry.

    Stating that it is well known that technology is changing fast, “and unless we are able to replace our assets fast, we cannot match with other countries in terms of productivity, CII has recommended that depreciation rate be raised from 15 per cent to 25 per cent, as was the case earlier, provided the rate charged under Income Tax is the same or higher than charged under the Companies Act.

    Development of infrastructure would also benefit from the industry body recommendation that the Minimum Alternative Tax is abolished. If it is not, CII feels, it should at least be removed for infrastructure companies in order to promote development and to motivate the private investor to come into this sector.

  • Ficci moots 10-yr tax holiday for animation, gaming industries

     
     

    NEW DELHI: With the annual budget coming up, the Federation of Indian Chambers of Commerce and Industry (Ficci) is lobbying for a 10-year tax holiday for the animation, gaming and VFX industries.

    Ficci says the sector, which holds tremendous promise, is suffering because the present government policy is to subsidise foreign productions in India, whereas Indian companies are burdened with a slew of taxes.

    Ficci has raised an important cultural point that insiders say might sit well with I&B minister Priya Ranjan Dasmunsi, who has been talking of Indian values rather loudly of late. Ficci feels that due the tax burden, Indian animation companies are not able to produce Indian content and hence an entire generation of Indian children are growing up on a staple of foreign superheroes.
     

    The industry body has also proposed the removal of CVD duty for a period of 10 years. The high-end machines used for the production attracts an import duty, Ficci says, adding that at present the duty structure is high: basic duty of 12.5 per cent, CVD of 16.32 per cent, special CVD of 4 per cent.

    After including educational cess, the overall duty comes out to be 36.8 per cent, it explained.

    The provision for Service Tax is financially hitting Indian animation studios extremely hard, Ficci has said in its budget wishlist.

    “Most of these studios are those that are developing a large amount of original content. Those studios that are export oriented and are thus under STPI are not exposed to the Service Tax at all, whereas the ones that are making or planning to make any Intellectual Property (original Indian content) in India for any client or broadcaster have to pay a service tax of 12.2% (this is going to be @ 12% in the new financial year, as per the latest budget),” says the Ficci paper that indiantelevision.com accessed.
     

    “We all have seen a rapid boom in the software industry, thanks to their exemption from the service tax. There is a big potential for Indian animation studios to grow manifold from where they are right now, the major success of the animation sector will be in creating the original Indian content and distributing it globally,” says the paper.

    It argues that if the country can make special efforts and can exempt animation industry from paying service tax, it would really contribute to a great extent towards promoting the industry and also the traditional and creative artists.

    Explaining the issues in the sector, the Ficci note despairs that the animation as an industry in India is covered under STPI, but STPI predominantly holds good for a BPO nature of work, where outsourcing is the main module and most of the studios which are getting benefited from STPI have to make sure of an export commitment of more than 85 per cent.

    As a result, it holds, many Indian studios wanting to produce original content based intellectual property and use art and talent from India to produce animation stories do not get any such benefits.

    As creating original content in India attracts custom duty and also the freshly levied sales tax (VAT) on off the shelf software, sales tax of 12.2% (which might increase further) and further also the income tax component, the Ficci paper has held.

    Together, these act as a major deterrent against studios producing and creating original content with an Indian heritage base or any other indigenous original content creation within the shores of the country.

    Currently, there is just no encouragement of developing original Indian content to be put forth to the entire world in the form of animation.

    This is leading to more and more studios working on foreign content and is leading to a severe lack of animated Indian stories in our domestic television schedules. In fact in the current scenario there is not one television channel that is exclusively dedicated to the kids showing original Indian content.

    “Hence,” Ficci argues, “our next generations of kids are growing up on a staple diet of foreign superheroes and legends while their exposure to Indian history, culture and heritage is being restricted to school textbooks. Storybooks and comics are being quickly replaced by television content and specially animated television content.

    Ficci has also demanded that the tariff barrier on gaming consoles be reduced, as it is acting as a hindrance to developing such consoles in India and putting the related software sector in a tight spot.

    The paper has argued that the entire tariff of approximately 36.74 per cent is passed through to the customers, translating to high prices for such consoles, which affect affordability and therefore access.

    High tariffs, it says, also lead to the growth of a grey market in products, which for the gaming consoles market in the country stands at 300,000 units, and leads to a loss of revenue to the government.

    Ficci feels the growth of the grey market also limits the government’s ability to ensure high quality and safe experience for customers that desire this exciting entertainment device.

     

    Pricing and affordability are key aspects that can enable the development of the gaming consoles market in India. Rationalization of the tariff structures will therefore mean a more affordable pricing structure that will enable greater market access for such consoles.

    “A recent study conducted by a market research agency, estimates that by lowering the CVD alone, which currently stands at 16.32 per cent, will result in projected import of gaming consoles to the tune of 400,000 units in the next five years,” the paper says.

    Ficci quotes a Nasscomm study and says: “According to Nasscomm, a game that would cost around $3 million to $6 million to develop in the United States can be produced for only $500,000 to $3 million in India.

    “In fact 25 per cent to 30 per cent of the revenues from a blockbuster console-based game, which often match those of a blockbuster Hollywood movie, amounting to $250 million or upwards, is the developers cost,” it adds .

    In addition to this competitive edge of development cost arbitrage, Indian software developers also have the potential to tap into the potentially diverse domestic market for gaming and develop customized games in vernacular languages, thereby broadening the scope of the Indian gaming market.

    Though the Nasscomm study acknowledges that currently the gaming market in India is undeveloped, it projects a potential growth with a CAGR of 78 per cent, amounting to $ 300 million by 2009 . It also projects that the current employment scenario in India in this sector can grow from approximately 600 people employed in the gaming industry in 2005 to approximately 2,000 professionals in 2007.
  • 3PL market revenues estimated to grow to $140 million by 2012: Frost and Sullivan research

    3PL market revenues estimated to grow to $140 million by 2012: Frost and Sullivan research

    MUMBAI: Frost and Sullivan’s Automotive and Transportation Practice South Asia and Middle East will be hosting an analyst briefing webinar on 15 December from 11 am to 12 noon, on rapid growth of organised retailing – driving the Indian retail 3PL market.

    The booming Indian economy is leading to the burgeoning purchasing power of the consumers and the rapid growth of the retail sector, especially the organised retailing segment. Entry of several international retailing companies, along with domestic major industrial groups focusing on the retail sector is driving this growth.

    However, success in this competitive and dynamic sector depends on achieving an efficient logistics and supply chain, which could be provided by professional logistics service providers such as the 3PL companies. The 3PL market revenues in this sector are estimated to grow from $49.5 million in 2005 to $140 million by 2012, at a compound annual growth rate (CAGR) of 16.0 percent, asserts an official release.

    While the market is continually expanding, 3PL service providers in India need to address a few challenges such as shortage of skilled manpower and highly diverse geographic conditions to gain maximum share in this market.

    The number of participants in this market has grown to be more than 400 in 2005. The Indian retail 3PL industry can be divided into three distinct tiers: national 3PL companies with nationwide presence, regional 3PL companies with a strong presence in one or two regions, and local 3PL companies with small or remote presence.

    Frost and Sullivan’s research has identified that the largest market segment for 3PL services as of 2005 is transportation, followed by freight forwarding.

    Frost and Sullivan Automotive and Transportation Practice industry analyst Srinath Manda said, “In this robust environment, it is important for service providers to customise their service offerings coupled with competitive rates in order to truly capitalize this opportunity.”

    Recognising the importance gained by the 3PL market in the Indian retail sector, this briefing is structured to address retail 3PL market definitions and segmentation, market trends and growth drivers, market size and forecasts, end-user analysis, industry profile and major participants, industry challenges, and future opportunities, adds the release.