ITV

Tag: service tax issue

  • IBF to discuss service tax issue this week

    NEW DELHI: The issue of service tax is once again rearing its head and the broadcasters feel that a tough line needs to be taken. The contentious, but unresolved issue, which has been dogging the media and advertising industry since 2002, would be discussed by the Indian Broadcasters’ Foundation (IBF) at a board meeting slated to be held later this week.
     
     

    According to sources in the broadcasting industry, if all the members of the IBF agree, then it is likely to be decided that those clients who are not including the eight per cent service tax in the release order would not be entertained and their ads would not be aired.

    It is also being contemplated that a provision for a separate entry for service tax be made on any business transaction paper that would enable broadcasters to collect the service tax from clients and forward it to the authorities concerned.

    However, taking such a tough stance would need a lot of willpower on the broadcast industry’s part as such “experiments” tried out earlier had fizzled out no sooner had they been kicked off.

    In September 2002, some top channels, including Star, Sony and Zee TV, had stopped airing ads of Hindustan Lever products as well as Colgate from the first of the month. Reason: these are the two biggest advertisers who were still not adding the then five per cent service tax (imposed by the government) in the final ad release order.

    But even at that time, not all broadcasters blacked out ads of “truant” companies. Looking at the present case scenario, Prasar Bharati, for example, is still undecided on what course of action to take where defaulters are concerned, This is in spite of having sent out a letter to all advertisers to this effect last week. Prasar Bharati has recently said that those advertisers who book bulk time on DD News would be exempt from service tax.

    Harking back to the situation in 2002, the boycott did not continue for long and soon most advertisers were back on TV channels. The pressures of revenue losses took their toll. Taking the case of HLL, its annual TV ad spend in 2002 was streets ahead of any other advertiser at Rs 1.5 billion. On Star alone that worked out to Rs 2 million every day then.

    Can the broadcasters bite the service tax bullet in 2004?

    Keep tuned in for more details later this week.

  • Sony, Zee blink on service tax issue, Star stands firm

    MUMBAI: When reports started circulating on Wednesday that chinks were appearing in the “united stand” of broadcasters to hold firm on the issue of who should pay the 5 per cent service tax on ad billings, it was surprisingly national broadcaster Doordarshan that first was cited as breaking ranks.

    Yesterday the “power of one” prevailed as FMCG behemoth Hindustan Lever Ltd (HLL) had its way on the issue with all the broadcasters, with only Star India continuing to hold out.

    Star had also pulled off Pepsi and Colgate advertisements over the issue. At the time of posting, however, informationavailable with indiantelevision.com indicate that while the standoff continued between Star and HLL and Colgate, Pepsi had agreed to the lead broadcaster’s terms and the deal is expected to be signed today.

    HLL’s power comes from an annual Rs 1.5 billion TV ad spend that is streets ahead of any other advertiser. By blacking out HLL, Star TV is losing Rs 2 million every day, CNBC India has reported.

    Still, Star does not look like backing down in the immediate term at least. It’s line of reasoning being that the effective rates that HLL pays out are far lower than other advertisers due to the size of its adspend so for it to ask for the adjustment on the service tax as well is unacceptable.

    There is an argument going round that with the Champions Trophy kick-off on 12 September, ad spend would anyway be heading towards Set MAX so Star is unlikely to be able to sustain its boycott. This however, does not look like being a factor in the negotiations as neither HLL nor Colgate are big advertisers for sports events.

    What will make the difference in the end is whether HLL’s threat that putting similar monies behind a group of other channels will give it the same effective reach is carried through.