Concept of setting-up Media Cities needs to be explored by the Government: Deloitte

Ashesh Jani, Partner, Deloitte Haskins & Sells LLP shares few key expectations from Union Budget this year

Direct Taxes

  • Broadcasters pay band placement fees to cable operators/MSOs for placement of their channels on a preferred band to enhance viewership.  Clarity is required on whether band placement fees are in the nature of royalty or fees for technical services for the purposes of tax deducted at source.
  • India has a screen density ratio of 7 per million while countries such as USA has a screen density ratio of 125 per million. A five year tax holiday should be granted to new screens set-up similar to the provisions of Section 80-IB of the Income-tax Act, 1961.
  • Clarity on taxation as regards co-production of movies, where two entities come together and do work in their respective area.  Though there are no judicial precedent the Income-tax department seeks to tax this arrangement as an ‘Association of Persons’ (AOP) considering it as a separate entity.  Clarity is required in the legislation on this account.

Indirect Taxes

  • Temporary transfer of rights to Television channels for telecasting movies – is sought to be taxed by VAT authorities as well as Service Tax authorities.  This anomaly of double taxation needs to be resolved, pending roll-out of GST.
  • Unavailability of clear guidance on availing input credit on expenses incurred for Production and marketing of movies in cases where revenue from the movies are not certain or are received over a long period of time over several years.
  • Clarity on whether Co-production of movies is a Service rendered by the Co-producer to the other party, wherein service tax is applicable.
  • There is a logical demand of exempting Newsprint from VAT as production and logistics costare increasing.

Other areas:

  • Media and Entertainment is a big industry, generating considerable employment and business. The concept of setting-up Media Cities needs to be explored by the Government, through which various facilities and benefits can be granted to the Industry and to the people and businesses associated with the industry. This practice is prevalent in many part of the world.  Incentives to set up amusement and theme parks based on popular film industry and various aspects of entertainment world – like gaming, animation etc. should be given.
  • Governments of many countries give incentives/subsidies to film production companies for doing shoots in their country. The same needs to be introduced by the Indian Government to encourage shoots in India.
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