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Myriad taxes in various forms and diverse statutory compliances have plagued the growth of the Media and Entertainment (M&E) industry.
The industry hopes for simplification of the “onerous” tax laws and resolution of some of the long standing tax controversies impacting this sector.
“Levy of service tax and VAT on copyright acquired in content is a major pain point for the industry. Huge levy of entertainment tax, in excess of 30 to 40 per cent, on film exhibition is another area of major concern,” said Mr Himanshu Parekh – Partner, KPMG India.
Uncertainty over TDS
On the broadcasting sector, the industry growth is marred with a host of tax issues, the prominent ones being uncertainty surrounding TDS on several payments and higher withholding tax at 20 per cent in the absence of PAN.
Taxation of Foreign Telecasting Companies (FTCs) also continues to be a bone of contention, analysts say.
“Clarity on taxation of foreign film production houses in respect to their income from film distribution in India would be very helpful,” said Mr C.A. Gupta, Partner, Deloitte Haskins & Sells.
Clarification
Discounts to advertisement agencies, payments by television channels for acquiring programmes from producers, payments to FTCs for grant of distribution rights are some of the examples where there is a lack of clarity on the characterisation, consequently, on withholding tax applicability as well.
A clarification on this issue is also a need of the hour for the industry, Mr Gupta said.
Litigation surrounding taxability of advertisement revenues and subscription revenues including its characterisation, issues relating to existence of permanent establishment in India especially in light of the down-linking guidelines is a major cause of concern for FTCs.
“Some sort of relief measures in that regard would be welcome,” Mr Gupta said.
A parity should be established amongst the various media sectors as regards the applicable indirect taxes. Multiple taxation in the form of service tax and VAT on film producers' revenues are unfair and should be appropriately addressed, he added.
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