Broadcaster's demand for net billing agreed; IBF-IAAA/ISA stand-off ends

Finally a solution to the impasse between broadcasters body, IBF and advertising agencies bodies, IAAA & ISA has been worked out. In a meeting that lasted over seven hours, representatives from IBF and IAAA last night arrived at an elegant solution that meets the needs of broadcasters and at the same time assures agencies of their legitimate earnings. As a result, advertisers' ads are back on air starting today, i.e May 3rd.

Says Arvind Sharma, President AAAI, "We are happy that we have resolved the impasse.  Advertisers' spots will be back on air starting today. We ensured that both broadcasters' and agencies' business interests are protected.  We are happy that the solution we have found will meet the needs of our member agencies in terms of their transactions with their clients."

Post an income tax order sent six weeks ago, advertisers had stopped airing ads from 6 pm onwards on April 30th. They are facing tax demands to the tune of almost Rs 600 crores, being the TDS on the commission earned by advertising agencies from their clients on the gross amount of the bill raised. Advertising agencies were very reluctant to let go this age old practice. The agencies are in opposition as all discussions and consequent contracts and paperwork happen on the basis of gross rates.

However AAAI continues to maintain that the tax demands made on some broadcasters are bad in law. It has committed that it will attempt to get a circular from CBDT. A circular that clarifies that broadcasters like other media  are not required to deduct TDS from agency commission since broadcasters do not pay the agency commission.

As per agreement now, broadcasters will bill the agencies at RS 85 for a Rs 100 value ad. The agency will in turn bill the clients for gross. In other words the agency will now bill the client for an amount not exceeding 1.1765 of the net value of the bill.

It is more preferable to find a permanent solution to this age old practice once and for all. There may be heart burns at this stage but once both the parties accept it there will not be any complaint as with time every new systems eventually gets accepted as a new way of life, just as post digitization now there are less voices of dissent.