‘TAX’
a term which can annihilate the life of a joyful and cheery man
within seconds, and if in context to the media and entertainment
industry then only god can help them. The media and entertainment
industry is a highly taxed sector in India. Mr. Himanshu Parekh,
Executive Director, KPMG in his presentation had stated that the tax
rates concerning with entertainment varied from 15-50% in different
states.

The
issues related to tax can be divided into FILM, BROADCASTING
COMPANIES & DTH CABLE COMPANIES.

• Key
  issues related to taxation of Film Sector:
• Service
  tax loss in respect of theatrical revenues
• Ambiguities
  surrounding Rule 9A/9B of whether it extends to non-theatrical
  rights,
• Is
  it discretionary or mandatory and does it override other provisions
  of the IT Act;

• AOP
  exposure and entertainment tax

The
key issues relating to tax in broadcasting are pointed down:

• Withholding
  tax in acquisition of TV programs,
• Placement
  / carriage fee,
• Agency
  commission and transponder charges,
• Deductibility
  of cost of content,
• Dual
  levy of service tax & VAT on content,
• Carry
  forward of loss on amalgamation and taxation of foreign telecasting
  companies,

Finally the last issue with
taxation in the media and entertainment issue are related to the DTH
and cable providers:

• The
  withholding tax on discount on sale of STB / RCV(recharge coupon
  voucher) a charge is implied on RCV as they are considered as a
  product therefore taxable,
• Double
  levy of tax on installation & activation charges and double levy
  of tax on RCV,

A
5 five panel jury was assembled with the background varying form
production houses to broadcasters to network providers. The session
was headed by Mr.
Himanshu Parekh, Executive Director KPMG
with a presentation on the tax, followed by a discussion on the
various topics and the jury’s thought on the current tax scenarios.
The jury consisted of

• Mr.
  Narayan Prabhat Ranjan, CFO, Viacom 18,
• Mr.
  Sujit Vaidya, CFO, Disney UTV
• Mr.
  G Sambasivan, CFO, Tata Sky Ltd
• Mr.
  Vineet Garg, Deputy CFO, Hathway Datacom

Mr.
Narayan Prabhat Ranjan mentioned during the discussion that the sector was being
unnecessarily being burdened by the dual taxation that is service as
well as value added tax. The major issue with the litigation of the m
& e sector was the ambiguity in the sector that is to say that
the rules of income tax act are not very well defined and is open to
confusion.

Mr.
Sujit Vaidya stated
that the growth of the industry and the tax structure were not in
step which has led so many tax litigations for the industry. He added
that piracy was another key challenge for the industry besides tax
discrepancy. To combat piracy, he urged the government to provide
incentives to theatre owners to enable them to penetrate rural and
tier 2 & 3 cities by increasing the number of screens, which was
far less than the desired number a present in the country

Mr.
G Sambasivan said
that the present tax structure of the M&E sector is a dampener
for investors as they are not able to predict favourable return on
their investments. He suggested that the government should consider
lowering of taxes, which were very high and also look at simplifying
the overall tax regime.

Mr.
Vineet Garg said
that the government should facilitate the industry by easing taxation
compliance and provide tax rebate to the sector. He added that the
number of tax litigations have been on the rise owing to complex tax
structure which needs to be corrected.

The goods and services
tax (GST)
is like a boon for the media and entertainment industry. The
initiation of the GST would lessen the burden that the companies face
by paying dual tax.

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