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Tag: GST

  • Guest Column: M&E sector pins hopes on a developmental budget

    Guest Column: M&E sector pins hopes on a developmental budget

    The market size of the Indian media and entertainment (M&E) sector is estimated to be in excess of USD 20 billion. India has more than 180 million television households and approximately 900 television channels (including news and current affairs). The country also produces the highest number of films–around 2,000 films every year in more than 20 languages.

    The key sub-sectors under M&E include (1) broadcasting, (2) print, (3) films, (4) sports, (5) radio, (6) music, (7) digital advertising, (8) out-of-home advertising, (9) animation and VFX, (10) gaming, (11) live events. The M&E sector is expected to outpace GDP growth in 2018. Now, with everyone’s eyes on Budget 2018 proposals, the key expectations of the sector are outlined below:

    Mergers and amalgamations

    Industrial undertakings are allowed to carry forward tax losses in case of merger or amalgamation. The definition of industrial undertaking, includes manufacture of computer software, providing telecommunication services. However, the sector (including broadcasting, radio) has not been included in this definition. Accordingly, the benefit of tax losses is currently not available for M&E players in cases of consolidation.

    On account of evolving business models (including moving to a B2C model), there is a thrust on consolidations within the M&E sector. Considering this and the convergence of the broadcasting and radio sectors with telecommunications, the government should consider including broadcasting and radio under the definition of industrial undertaking for carrying forward tax losses. This would facilitate consolidations in broadcasting and radio.

    Infrastructure status

    Broadcasting is capital intensive and requires huge investment of funds on account of digitisation, upgrade of technology and infrastructure architecture. Currently, broadcasting is not granted infrastructure status and the government should consider granting such status to the sector. This, amongst others, would aid financing for future growth and help the sector achieve its potential.

    Foreign direct investment (FDI) in print

    Currently, FDI in print (news and current affairs) is capped at 26 per cent. This sector is trying to deal with the impact of digitalisation. Considering the trend of liberalising the FDI policy and sector’s needs for investment in digital assets, the government should consider increasing the FDI cap for print to 49 per cent. This would help in attracting foreign funds into the sector.

    Transfer pricing

    Safe harbour is a mechanism under which tax authorities accept the transfer price (under certain circumstances) declared by the taxpayers, without undertaking a detailed audit/scrutiny. The scope of safe harbour transactions has been enlarged in 2017 to provide certainty to taxpayers and transactions such as provision of software development services for IT/ITeS sector are part of the safe-harbour regime. However, transactions specific to the M&E sector are currently not a part of the regime.

    The government should consider including the transaction of distribution of content by an Indian company to its overseas group company under the safe-harbour regime. This would provide relief to M&E players in terms of obtaining certainty from a transfer pricing perspective.

    Withholding tax

    Over the last couple of years, the government has been forthcoming in terms of clarifying tax positions (for instance expense deduction for abandoned films, withholding tax in respect of advertising contracts and content transactions) by way of circulars to avoid litigation. Outlined below are a few issues that the government should consider clarifying the withholding tax position to reduce litigation:

    ·  Channel placement fees: The government should consider clarifying that such payments do not amount to royalty/fees for technical services considering the Bombay high court decision on this issue.

    ·  Live broadcast rights: Clarifying that such payments do not amount to royalty/fees for technical services should be considered based on the Delhi high court and Mumbai tribunal decisions on this issue.

    ·  Transponder fees: The government should also consider clarifying that a non-resident taxpayer can claim the benefit under a tax treaty for transponder fees and domestic tax law explanation of the process should not be       imputed to the tax treaty definition of royalty.

    Goods and services tax (GST)

    Services by way of admission to exhibition of cinematograph films is subject to GST at 18 per cent or 28 per cent, depending on the price of the ticket. In addition to GST levied by state and central governments, the right to levy and collect tax has also been given to local authorities and this right continues even after implementation of GST. It should be ensured by the government that such local bodies do not levy additional tax on exhibition of films. If levied, a corresponding reduction in GST rate should be granted.

    The M&E sector is at the cusp of exponential growth opportunities but to achieve such growth trajectory, the support of the government reforms is of utmost importance. Hopefully, on 1 February 2018, when the Budget proposals are presented, we would take a significant step in that direction.  

    Thakkar is Partner and Bhojwani is Director with Deloitte India. The views expressed are personal and Indiantelevision.com may not

  • GST fails to spoil Food Food’s party

    GST fails to spoil Food Food’s party

    MUMBAI:  When largely all television channels were struggling in the aftermath of the goods and services tax (GST) implementation, Food Food channel remained insulated from all the brouhaha. Celebrity chef and promoter Sanjeev Kapoor, speaking to Indiantelevision.com, said that the channel he co-founded saw no adverse impact of the tax that has been the bane of existence of many media companies.

    The food content channel is run by Turmeric Vision Private Ltd, a joint venture between Kapoor, Astro Overseas Ltd and Mogae Consultants.

    “Bigger channels might have been impacted but not us,” he said. Food content is always on people’s minds even as male viewership has been increasing as the taboo of men entering the kitchen is fading away. “The primary viewership today isn’t always female. There is great interest from the male audience, too, which wasn’t the case earlier.”

    Unlike other content such as automobiles or sports, food is a universally loved topic. Everyone relates to it and food lovers will especially gobble it up. He said that India had three types of entertainment preferences–Bollywood, cricket and food, which wasn’t very hot until recently.

    According to media reports in 2016, the network saw an investment of around $30 million (around Rs 180 crore) and had incurred operating loss, which kept reducing year-on-year. The company achieved break even in financial year 2016-17. “We are confident that 2018 will be far better than 2017,” he said.

    Kapoor dismisses the idea of constantly thinking of improving a channel’s ratings and repackaging shows in order to ramp up viewership. Instead of calculating the impact via ratings, the channel focuses on reaching relevant homes. “If we want to be in the top of ratings chart, we will have to create the next Naagin of food and we don’t want to do that. We want to stay focussed on our content, which is more trust centred. So, the ratings are relatable for general entertainment channels (GECs) but our relevance is towards more advertisers.”

    Digitally, Food Food looks at recipe-based content while TV is all about storytelling. Although Kapoor admits that over-the-top (OTT) platforms are important, the channel doesn’t have any app-specific content yet. Instead, the channel’s social media is very active. Moreover, Food Food has associated with SonyLiv and Jio for providing live shows to the platforms; in three months, Kapoor said, the company will analyse the results and decide the future roadmap. Partnerships with two more undisclosed OTT platforms are on the anvil.

    Food Food was the first channel to go high definition (HD) in India. The channel is aware that standard definition (SD) is still more prevalent in the country and, therefore, also distributes its content in SD.

    Food primetime is 1 pm to 5 pm and 8 pm to 11 pm. Kapoor believes that in the food genre, it is not the celebrity chefs behind the channel’s success but is the channel that makes the chef a star.

    Food Food already has presence in the US (Dish Network), Canada, the UAE and Qatar and owns the IP rights to over 2600 hours of programming. It has also syndicated around 1000 hours of programming internationally to the likes of airlines, news channels in South India and to Colors in the US.

    Also Read: Chef Kapoor-promoted Food Food bolsters ops with Amagi Cloudport

    Food content dominates viewership on lifestyle channels

  • Kolkata cable operators want cable TV GST at 5%

    Kolkata cable operators want cable TV GST at 5%

    MUMBAI: The plea of cable TV operators in Kolkata to reduce the goods and services tax (GST) from the current 18 per cent to 5 per cent has been heard.

    The West Bengal government’s state municipal affairs minister Firhad Hakim was quoted by the Cable TV Equipments Traders & Manufacturers Association (CTMA) as saying, “Cable television services are essential services and should not have 18 per cent GST, which is in effect at present.” He went on to say that he will, on behalf of the cable TV operators, present the issue to the finance minister Amit Mitra, who is a member of the GST council.

    Siticable, Manthan and GTPL-KCBPL are the main players in the West Bengal market. GST is divided into various slabs right now – 5 per cent, 12 per cent, 18 per cent and 28 per cent.

    Bengal Broadband to offer cable TV & broadband services in W Bengal

    A bumpy ride for gross billing in Kolkata

    Kolkata MSO GTPL-KCBPL applies for broadband license

  • Axis mutual funds does a scientific experiment for ELSS

    Axis mutual funds does a scientific experiment for ELSS

    MUMBAI: In an era of dime a dozen social experiments which do the rounds on social media, The Womb, as part of an investor education initiative for Axis Mutual Funds conducted a scientific experiment to prove how ELSS, unlike other tax saving options, is not just helpful in saving tax but a great way to way to create wealth. The experiment captured on video has been released digitally on 4 January.

    Axis Mutual Fund vice president of marketing communication and digital marketing Rohan Padhye says, “January to March period are typically the tax season during which everyone hankers around to save tax. We felt it’s important to educate consumers that they should not just think about saving tax, but invest for wealth creation too, through ELSS. ELSS has become all the more relevant today given the low-interest rates offered by traditional tax savings options. The endeavour was to inform consumers about this functional aspect in a simple and entertaining way. I have to say, we at Axis MF were pleasantly surprised when we first heard the idea of a Science Experiment. We thought we were hearing it wrong but it is the bizarreness that made us confident about the campaign.”

    On how did he get to the idea of a scientific experiment ,The Womb creative partner Suyash Khabya says, “The root for the idea came from the medium itself. It was not a TVC; it was a digital media campaign, so we had to think accordingly. Social media is stuffed with boring, staged and uninspiring social experiments. In fact, it’s become a format and the novelty has waned. So we just took a spin on it.”

    The Womb founding partner Kawal Shoor mentions, “There are 2 audiences for this campaign. The first is the traditional ELSS target – the corporate salaried individual. For her, during the tax season ELSS is one of the options to invest in order to save tax. So we had to make ELSS top-of-mind. The second is the young trader/shopkeeper/service professional who, due to GST , etc., has just come into the tax bracket. The pinch of paying high taxes from the ‘khoon-paseene ki kamaai’ for them is very real. We had to, through our work, tackle that sentiment too. Hence the ‘science experiment’ on an emotional issue.”

  • The year of hiccups for marketers

    The year of hiccups for marketers

    MUMBAI: The year 2017 was when brands were unwillingly thrown into a roller-coaster ride only to emerge dizzy and faint. The highs weren’t enough to ride out the lows.

    2017 will be seen as a year of turmoil for brands. Just when the effects of last year’s demonetisation were ebbing away, the government threw another spanner in the works in the form of the goods and services tax (GST).

    Much before its implementation, marketers and consumers cheered on the GST to be a saviour for the industry, touted to solve multiple tax complications. But its launch timing, months after demonetisation, crippled the Indian economy even further primarily due to faulty implementation.

    The year began with the economy regaining its composure after the ban on bills of Rs 500 and Rs 1000, which led to troubled times for businesses across the country, especially in the cash-dependent sectors. No one was spared from the effects, be it kirana stores, big FMCG players or media and advertising agencies. As physical money became dear, online payment apps were the saving grace. Paytm, Mobikwik, Zappr and the likes became a must-have app for a majority of Indians and their profits grew four fold by March 2017. 

    In the months after GST was passed, sales crashed, margins dropped and marketers became extra cautious before investing in new products and advertisements. Brands steered away from marketing and advertising post August, which otherwise is considered as the ideal period for creating new campaigns as the festive season in India commences from September and goes up all the way till the new year.  

    The crashing economy brought down infrastructure, including real estate, to its knees and crushed consumer demand with the implementation of the new Real Estate Regulation and Development Act (RERA) in May. Slow implementation of the new real estate regulation across the country as well as uncertainty over the impact of GST on home prices pulled down consumer sentiment this year. According to a report by the Centre for Monitoring Indian Economy (CMIE), home loan growth in April-October fell by 32.7 per cent from a year ago, one of the biggest declines in the last five years.

    It was not only the FMCG and real estate sectors that had a nightmarish 2017. The USD35 billion liquor industry was subjected to one of the worst hangovers not only because of GST but also because of a Supreme Court ban on all alcohol sales within 500 meters of highways across India from 1 April 2017. Although the ban was implemented to curb drunken driving on highways, it dried up the hospitality industry, state government and liquor companies who ended up losing Rs 50,000 – Rs 70,000 crore. The market fell nearly 30 per cent in the immediate quarter after the highway ban and at least 1,500 retail outlets closed down.

    After all the bad news, 2017 also saw some strong revenue figures and new entrants in the market. Patanjali recently became India’s most trusted FMCG brand as per The Brand Trust Report India Study 2017. Valued at over Rs 30 billion, Patanjali estimated its annual turnover of the year 2016-17 to be Rs 10,216 crore. In November this year, the company also signed a memorandum of understanding (MoU) of Rs 10,000 crore with the Government of India at the World Food India 2017. To buck up against the Baba Ramdev-led ayurvedic company, top FMCG players went the whole nine yards in their bids to recapture the markets they lost. While Hindustan Unilever Limited (HUL) launched its version of ayurvedic products under brand Ayush, homegrown FMCG major Dabur is in the process of modernising its ayurveda portfolio and introducing new products. The multimillion-dollar company also launched a traditional ayurvedic product Dashmularishta and menstrual pain relief tonic Ashokarishta. 

    Lever Ayush, in its first campaign, took a potshot at Patanjali by pointing out the naive ways in which we categorise ayurvedic products like skincare creams, soaps and toothpaste. It went on to say that not every product with green packaging or leaves on the cover essentially fit ayurvedic ingredients. The company has managed to create its dominance in the southern market by aggressive marketing and advertising. 

    According to a Nielsen Report, herbal segment in India accounts for 41 per cent of the Rs 45,000 crore personal care market. Hence, sectoral leader HUL has come out all guns blazing in a field so far ruled by Patanjali, while Colgate-Palmolive has placed its own natural products to take back its market in the toothpaste segment and Dabur India now has a major share in the honey segment as opposed to Patanjali. 

    Television remained the strongest sector for advertisers this year despite depressed economic conditions while digital continued to ride on a high growth trajectory. Advancement in infrastructure, evolving audience measurement technology leading to better content and lowering data costs induced viewers to greater digital consumption. Television advertising is expected to grow at over 10.3 per cent with free to air channels gaining significance, localised content and high-definition experience boosting regional channels’ viewership and sporting leagues outside of cricket becoming increasingly popular.

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    Source: Group M

    Print media continued to witness a slowdown in 2017 where while English newspapers remained under pressure, regional language papers demonstrated strong growth.

    The out of home (OOH) industry registered a slowdown in growth rate at seven per cent majorly due to adverse impact of demonetisation and GST but is projected to grow at a CAGR of 11.8 per cent primarily driven by development of regional airports, privatisation of railway stations, growth in smart cities, setting up of business and industrial centres, and growing focus on digital OOH.

    The year also saw a rise in influencer marketing and brands sent out messaging by using ‘internet celebrities’ to put in a good word for the product on social media. According to Business Insider Affiliate Marketing Report, approximately 15 per cent of the digital media industry’s revenue is achieved through affiliate (influencer) marketing. A recent report suggested that 40 per cent consumers are sold on a product or idea if an influencer they followed were to recommend it. 

    The turmoil in the Indian telecom industry can be attributed to several things. Smartphone penetration in the country increased this year by three folds and today India has over 300 million smartphone users which is projected to grow by more than 50 per cent in the next few years. According to Counterpoint research, 300 million people out of 650 million phone users own a smartphone, making India a big market for brands and telcos. Indian tycoon Mukesh Ambani sparked a price war in 2016 with the launch of Reliance Jio with other telecom giants scattering to acquire market share. Vodafone and Airtel lured customers with data at cheap prices and unlimited calls. But Reliance Jio clearly won that war. Within the first month of commercial operations, Jio announced that it had acquired 16 million subscribers. This was the fastest ramp-up by any mobile network operator anywhere in the world. Jio crossed the 50 million subscriber mark in 83 days since its launch subsequently crossing 100 million subscribers on 22 February 2017. By October 2017 it had about 130 million subscribers. 

    On 21 July 2017, Jio introduced its first affordable 4G feature phone, powered by KaiOS, named as JioPhone. The price announced for it was Rs 0 with a security deposit of Rs 1500 which could be withdrawn back by the user by returning the JioPhone only after 3 years. This phone was released for beta users on 15 August 2017 and pre-booking for regular users started on 24 August 2017. 

    In order to strengthen its presence in the ongoing battle of the telecom sector, Sunil Bharti Mittal-led Bharti Airtel launched Android powered 4G smartphones in partnership with Indian mobile company, Karbonn Mobiles. Airtel will partner with multiple mobile handset manufacturers to create an ‘open ecosystem’ of affordable 4G smartphones and bring them to market for virtually the price of a feature phone. It is also in talks with Intex mobiles for similar offerings. Domestic handset maker Micromax and Vodafone came together to offer a smartphone, effectively at a price of Rs 999 if the buyer retains the device for three years.

    With data becoming much cheaper this year and mobile manufacturers selling handsets at throwaway prices, mobile handsets became much affordable and smartphone penetration increased three folds. A lot of this has to be credited to Chinese players who took the Indian smartphone market by storm. While Vivo and Oppo were aggressive in marketing their products, both invested heavily in OOH advertising in 2017. We saw a lot of hoardings and static banners with Deepika Padukone (Oppo), Ranveer Singh (Vivo) and Virat Kohli (Gionee) promoting their respective brands (as brand ambassadors). While Vivo came on board as the title sponsor for India’s premier cricketing league IPL, rival Oppo became team India’s official jersey sponsor for all its matches for five years. 

    According to various reports, today Chinese brands such as Lenovo, Oppo, Vivo, Gionee and Xiaomi have captured over 50 per cent share of India’s smartphone market even as Apple and Samsung fought a tough battle to hold on to their reigns.

    Amidst all this, the biggest highlight of the year in the space was the launch of Apple 8 and Apple X. The company launched its flagship phones in much fanfare in September this year on its 10th anniversary.

    Still recouping from the setbacks of 2017, marketers are pinning hopes on 2018 that improved market sentiment will bring them back to a steady growth path. The prospects of good economic growth, coupled with a revival in demand and consumption, will help them overcome the hit they took in volumes and profits in 2017.

  • Recalibrating India’s DTH sector after Airtel DTH-Warburg Pincus deal

    Recalibrating India’s DTH sector after Airtel DTH-Warburg Pincus deal

    MUMBAI: For long, investors have given India’s DTH sector a pass-by saying the TV distribution sector (read cable TV) is rickety and has been digitised in a hurry to meet government mandates without too much thought and planning of the back end. Often times, DTH players have been bundled with the cable TV lot and considered a not-a-very-attractive investment.

    That was until last week.  The announcement that Warburg Pincus was picking up 20 per cent stake in Airtel Digital TV (DTH) -with around 14 million subscribers – for a staggering $350 million at a valuation of $1.75 billion or Rs 11,204-odd crore should surely come as a shot in the arm for those distributing TV and running DTH platforms.

    Right now, there are six of them: Tata Sky, Dish-Videocond2h, Airtel Digital TV, Sun Direct, DD Free Dish, and the floundering-now-waiting-to-be-resuscitated Reliance Big TV.

    Most of them have been burning cash. Folks have been saying there are too many DTH operators in India. They have pointed towards the UK that has one, the US that has just two.  And questions have been asked if India has too many vanity plays in both television and distribution.

    A senior investment analyst unwilling to be identified says last week’s Warbug Pincus vote of confidence in DTH highlights how upbeat the sector looks as an investment destination and how different it is from India’s cable TV scattered majors.

    It also raises questions around whether the Videocon management could have got a better deal when it decided to merge Videocon d2h with DishTV.  Was Videocon d2h a tad undervalued? After all, the difference in EBITDA between Airtel and Videocon d2h alone runs into Rs 170-odd  crore only. For FY 2016-17, Videocon d2h had an EBITDA of Rs 1018.1 crore as against Airtel DTH’s Rs 1222 crore. For fiscal 2017-18, Videocon d2h’s half yearly EBITDA stood at Rs 529.5 crore as against Airtel’s Rs 681.7 crore. Dish TV’s EBITDA for FY 2016-17 was Rs 972.8 crore, while it’s half yearly EBITDA for fiscal 2017-18 was  Rs 417.3 million.

    At the time of the merger, the combined entity’s valuation was placed at $2.7 billion for around 27 million subscribers of Dish TV and Videocon d2h. Combined the two would account for 16 per cent of the total 175 million hoseholds in India with around 2.80 million HD household and a combined proforma  EBITDA of  Rs 1826.2 crore. Going by the Airtel-Warburg numbers, the value of Dish TV-Videocon d2h should have been closer to $4 billion.

    Another senior industry observer opines that the Airtel-Warburg Pincus deal has opened up investors’ eyes all over the world about the growth potential in India’s DTH vertical.  The deal is probably one of the first-ever major large-ticket private equity placement deals in Indian DTH.

    What has changed in the past one year? And what is exciting investors to look at the sector differently?

    FreeDish to go away

    Indications are that the DD Free Dish threat is dissipating with the implementation of the new policy that the government has put in place with no renewals of slots taking place for private players. Industry professionals point out that the government is seeking to enhance the reach of its own channels on Free Dish.

    “It had deviated from its mandate–which was to reach out to all the rural areas where there are no transmitters and make the government’s voice reach those people. DD National was hurt because they gave slots to private GEC channels. The national channel’s viewership and revenue have since plummeted,” says one of them. “From Rs 1,400 crore in ad revenue, the figures came down to Rs 500-600 crore, out of which Rs 400 crore is from government enforced spending on the pubcaster. Its ad revenue is a measley Rs 200 crore and no private producer wants to produce for DD as it does not have the reach. With DD FreeDish likely to stop trading in bandwidth and not airing GECs, a window of opportunity for private DTH players to offer another option to rural and smaller town audiences will open.”

    Cord cutting – a hyped-up phenomenon

    Another senior industry researcher says that the phenomenon of cord-cutting has been hyped up by new entrants in the OTT space such as Netflix and their backers from the analyst community and investors in both the US and India.

    “Comparing the US and India is absolutely fraught with disaster. Even in cord cutting,” she says. “India has a very deep urban population and a very deep rural populace. The TV in the living room is still the centre piece of Indian homes; it is also moving into the bedroom. There will be no cord cutting; we will have both in India, the Netflixes as well as TV subscriptions.  Jio, too, has expanded the consumption of mobile bandwidth and nowhere is it posing a threat of cord cutting.”

    The impact of TRAI’s tariff order, GST and introduction of transparency

    The DTH industry has an estimated 90 million subscribers; the net figure is 65 million and the active is 52-55 million. The net sub number includes those subs who have been suspended for up to 120 days for non-payment; whereas actives are those who have subscribed and paid to for between zero and 30 days.

    Industry veterans point out that DTH operators are better placed to implement the TRAI’s new tariff regime which has been held up in courts.  One of them points out that the higher content costs that they have been paying to broadcasters will simply go away. “Our infrastructure allows us to permit millions of subscribers to unsubscribe online very easily and watch the channels and the shows they want to,,” says he. “Because of transparency our costs will go down with the execution of the tariff order.”

    Cable TV content costs, however, he points out are set to go up as under declarations of sub numbers to the tune of 50-60 per cent by LCOs to MSOs have been rampant. “After digitisation and GST, every connection is being reported to the MSO as everybody in the chain has to pay taxes. With this, the broadcaster will understand how many subscribers are actually there and he will charge transparently per sub basis. Based on that the fixed deals will happen,” he says.

    That should be good news for industry observers and naysayers who have been waiting like Godot for India’s TV content and distribution to unlock its true potential and value.

    Also Read:

    Warburg Pincus to buy 20% in Airtel’s DTH arm

    Reliance Big DTH to take FTA route under new management?

    STB import duty doubled to 20%

  • Demonetisation, decline in govt ads impact UFO Q2 numbers

    Demonetisation, decline in govt ads impact UFO Q2 numbers

    BENGALURU: Indian digital cinema distribution network and in-cinema advertising platform UFO Moviez Ltd (UFO) reported a 12.8 percent year-on-year (y-o-y) decline in consolidated operating revenue for the quarter ended 30 September 2017 (Q2 FY 2017-18) as compared with the corresponding year ago quarter. The company’s consolidated operating revenue was Rs 1,388.8 million for the quarter as against Rs 1,591.8 million for Q2 FY 2016-17. Advertisement revenue stood at Rs 372 million (Rs 517 million in Q2 FY 2016-17). Average advertisement minutes sold per show per screen stood at 3.52 minutes during Q2 FY 2017-18 (5.15 minutes in Q2 FY 2016-17).

    The company’s consolidated net profit after tax declined by 47.8 percent y-o-y during the quarter under review to Rs 102 million from Rs 195.3 million. Consolidated operating profit excluding other income (EBIDTA) for Q2 FY 2017-18 fell by 31.8 percent y-o-y to Rs 374.7 million (26.1 percent margin) from Rs 549.7 million (34.5 percent margin).

    “The last twelve months have been extremely challenging for the entire industry on account of one-off events such as demonetisation and implementation of GST, especially for the media sector, which was most severely impacted,” said UFO’s founder and managing director Sanjay Gaikwad. “Q2 FY 2017-18 was one of our toughest quarters. Advertisement revenue declined sharply on a high base of last year combined with slowdown in government advertisement spends. Nevertheless, we continue to remain extremely positive about the long-term growth prospects of the advertising business. We are hopeful that demand will pick up in a few months. The temporary slowdown has failed to deter us and we remain focused on achieving our long-term strategic goals by entering into a scheme of arrangement and amalgamation with Qube Cinema Technologies Pvt Ltd. We believe that this consolidation will further strengthen our position to capitalise on growth opportunities as the economy revives and gains steam.”

    Total expenses in Q2 FY 2017-18 reduced by 2.7 percent y-o-y to Rs 1,014.1 million from Rs 1,042.1 million. Ad revenue share (expense) increased by 9.8 percent y-o-y to Rs 155.5 million from Rs 141.6 million. Visual print fees sharing expense decreased by 24.8 percent y-o-y to Rs 153.2 million from Rs 203.6 million. Other expenses increased by 0.9 percent y-o-y to Rs 212 million from Rs 201.2 million.

    The company’s expense towards purchase of digital cinema equipment and lamps in the current quarter reduced by 1.8 percent y-o-y to Rs 159.5 million as compared with Rs 162.4 million. Employees’ benefits expense during the quarter under review dipped by 2.6 percent y-o-y to Rs 194.7 million from Rs 199.9 million. Other operating direct costs rose by 8.7 percent y-o-y during the quarter under review to Rs 140.4 million from Rs 129.2 million.

  • M&E items get GST relief from 15 November 2017

    M&E items get GST relief from 15 November 2017

    NEW DELHI: In a major relief to the media and entertainment (M&E) sector, the goods and services tax (GST) has been slashed on a large number of items including electrical apparatus for radio and television broadcasting from 28 per cent to 18 per cent.

    Although the government has failed to address the primary issue of entertainment tax which is a great dampener in view of the losses due to video piracy, the reliefs announced are a winner. The change in taxation is effective from midnight of 15 November 2017.

    In its last meeting held in Guwahati in Assam, the GST council under the chairmanship of finance minister Arun Jaitley agreed to cut the GST on several items in the M&E sector.

    Goods on which the council had recommended reduction of GST rate from 28 per cent to 18 per cent in the M&E sector are:

    1. Electrical apparatus for radio and television broadcasting

    2. Sound recording or reproducing apparatus

    3. All musical instruments and their parts

    4. Cinematographic cameras and projectors, and image projector.

    The cable TV sector may also get some relief as the relaxation also covers:

    5. Wire, cables, insulated conductors, electrical insulators, electrical plugs, switches, sockets, fuses, relays, electrical connectors

    6. Electrical boards, panels, consoles, cabinets etc for electric control or distribution

    Apart from this, the council announced exemption from IGST/GST in temporary import of professional equipment by accredited press persons visiting India to cover certain events, broadcasting equipment, sports items, testing equipment, under ATA carnet system. These goods are to be re-exported after the specified use is over.

    The council also said that in order to obviate dispute and litigation, it is proposed that irrespective of whether permanent transfer of Intellectual Property (IP) is a supply of goods or service:

    (i) permanent transfer of IP other than Information Technology software attracts GST at the rate of 12 per cent.

    (ii) permanent transfer of IP in respect of Information Technology software attracts GST at the rate of 18 per cent.

  • Reduce GST on film industry, IMPPA pleads to FM Jaitley

    Reduce GST on film industry, IMPPA pleads to FM Jaitley

    NEW DELHI: The Indian Motion Pictures Producers Association (IMPPA) has urged the government to fix 5 per cent as the maximum GST rate that should be charged on all goods and services connected with the entertainment industry including entertainment tax.

    In a letter to finance minister Arun Jaitley, IMPPA President T P Aggarwal said, “This will provide life to an industry which is being crushed under the heavy burden of tax and which needs immediate help and support of the government to survive”.

    Pointing out that IMPPA was the oldest body of filmmakers having been set up in 1937, Aggarwal said the film industry has been burdened with the extreme end of high GST.

    “In all other products, tax is levied after recovery of cost of production as well as input credit where all taxes and GST paid are adjusted in the GST payable,” he added. But in the film industry, GST has to be paid on goods and services as well as on sale of tickets irrespective of the fact whether the expenses incurred on making the film along with taxes paid thereon have been recovered or not.

    GST in the form of entertainment tax has to be paid on the sale of tickets from the first ticket onwards where it has been fixed at the highly unreasonable level of 18 per cent for tickets up to Rs 100 and 28 per cent for tickets more than Rs 100.

    The letter said that the imposition of uniform 18 per cent GST on majority of goods and services is also largely responsible for the miserable state of the film industry because very few films are profitable propositions and majority of films are disasters leading to the annihilation of the producers.

    Aggarwal wrote that the government should be “providing free entertainment to the people who pay so many taxes.” Instead, it levies heavy entertainment tax which has to be paid by the poor citizen on films. Producers deserve to get the full money since the films are self-financed without any government aid.

    He said that very few hit films make money while the rest are reeling in losses. Meanwhile, both the central and state governments cash in by imposing GST at every level. He demands that the practice of state governments choosing their own amount of entertainment tax must be abolished.

  • Sidhu’s cable, DTH tax plan gets Punjab cabinet nod

    Sidhu’s cable, DTH tax plan gets Punjab cabinet nod

    MUMBAI: Entertainment lately seems to be affected the most with one tax after another — the GST and tax on watching television programmes. Now, in a ‘blow’ to local cable network companies, entertainment tax will be levied on DTH and cable connections in Punjab. DTH operators however will now have a level playing field with the cable networks. 

    State local bodies minister Navjot Singh Sidhu told the cabinet that the nominal tax would ensure accountability on the part of cable operators.

    After the introduction of GST from 1 July, 2017, the tax levied by the state government had been withdrawn. The state cabinet has however approved levying of the tax through panchayats and municipalities through an amendment proposed in the next session of the Vidhan Sabha where it has the two-thirds majority, PTI reported.

    No entertainment tax, however, has been proposed for cinemas, multiplexes and amusement parks.

    The urban and rural bodies will now be allowed to impose and collect a nominal tax of Rs 5 per DTH connection and Rs 2 per local cable connection per month with the enactment of ‘The Punjab Entertainments & Amusements Taxes (Levy & Collection by Local Bodies) Bill 2017.’

    With around 44 lakh cable connections and 16 lakh DTH in Punjab, the bodies are expected to collect Rs 450-470 million (approximately Rs 369 million and Rs 96 million, respectively).

    Sidhu had been alleging tax evasions by Fastway Network, a company linked to the previous dispensation. In August, the minister had urged the CM’s office to take a call on the recovery of allegedly evaded tax of Rs 200 billion from Fastway.

    Also Read:

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    Punjab Govt falters in first leg of breaking cable monopoly

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