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Lockdown-hit advertising agencies seek help revive the sector

Our Bureau Mumbai | Updated on April 16, 2020 Published on April 16, 2020

Several crores of rupees of IT refunds are due to each ad agency

Urge government to expedite tax refunds and also settle dues from PSUs

To bail out the floundering advertising sector, which has been battling its own set of issues with Covid-19, the government has been asked to shell out what it owes to the ad industry in terms of TDS and dues, to help assist with the continuity of business.

Urging the government to pay up its dues is just one of the several measures outlined by the Advertising Agencies Association of India (AAAI) in a recommendation. The note highlights the importance of the advertising sector in the accelerated revival of the economy and has beseeched the government to come to the aid of the sector.

AAAI president Ashish Bhasin has sent a detailed set of recommendations in a memorandum to the Minister of Information and Broadcasting Prakash Javadekar, on behalf of the members of the association.

Noting that the TDS on advertising agencies have always been significantly more than the profits most make, the letter states several crores of rupees of IT refunds are due to each agency. The note asks the government if this can immediately be refunded for the past years, including for the Assessment Year 2019-2020.

Pointing out that many advertising agencies have substantial dues from the government and PSUs, the note asks whether these can be ordered to be released within the next few days.

“We want principally money that is owed to us by way of IT and GST refunds, and dues from government and PSUs for our advertising bills to be settled immediately,” Bhasin said.

None of the measures outlined (in the AAAI note) will lead to any revenue loss to the government, said Bhasin, adding: “They just need to show a kind heart. The timely help they will provide actually is the help they are providing to the people of India, since advertising is a critical input that can provide a ripple effect in reviving many sectors of the economy.”

Other steps

The note has also asked the government not to block the utilisation of GST credit and release immediately all credits blocked. It has also suggested that TDS should not be deducted when agencies bills are being paid by advertisers.

“Any payment made to us should not suffer any TDS deduction going forward, since there is unlikely to be any significant profit for the year. Further, we have sought a direction to banks and our debtors that they provide the much needed cashflow to pay salaries and meet other essential expenses, etc,” said Bhasin.

Terming advertising an investment, the letter states brand-building expenses should be treated as an asset and should be allowed to be amortised over the next three years. Many companies recognise the enduring benefits of advertising and this will encourage them to invest without fear of considerable decline in profits, it adds, which will spur enhanced consumption.

Pointing out that credit terms with media owners are pre-fixed, while advertisers are under no legal pressure to pay on the due date, the letter has requested advertising service to be categorised as an essential service, given the potential it has to revive the economy.

The letter adds since media houses are much larger entities, there should be a directive to provide additional credit to agencies, should the contra-payment be not available from advertisers. Stating agency cashflow is fragile and the business could come crumbling down in the absence of such a protection, the letter has said ad agencies business cannot continue for long without the help of the government.

Job loss seen

Without such a support, the letter states there would be significant job losses, and many trained professionals would become unavailable to revive the economy.

Since the bulk of the agency’s costs are fixed in nature - be it salaries, rent, electricity, communication, upkeep, media audience measurement reports, etc - the letter states income and cash flow has been in serious stress in the last month.

It has added that unless there is some intervention, many businesses will either file for bankruptcy or will have to undersize their operations.

Published on April 16, 2020

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