Monday, February 29, 2016

Budget 2016: A Mixed Bag For Ad Agencies?

As Finance Minister Arun Jaitley tabled the Union Budget 2016 today in the Parliament, expectations were afloat from all corners on how this year's budget should look like. While the media industry asked for a rationalized entertainment tax, exempt newsprint from VAT and end double taxation on temporary transfer of movie rights to television channels, the advertising agencies vowed for push for Digital India and no hike in service tax.

As per experts, overall there are some positives and some negatives in the budget.

According to Ashish Bhasin, Chairman and CEO, South Asia - Dentsu Aegis Network and Chairman, Posterscope & MKTG - Asia Pacific, "Not increasing the service tax is a positive, particularly for the advertising and media sector. General expectation was that Service Tax may go up in anticipation of higher GST rates. Controlling the fiscal deficit and several steps to invigorate the rural economy and rural consumption are positive signals. A rural consumption revival will help the economy and the advertising and media sector tremendously," he informs.

Meanwhile, the Government's focus on infrastructural development with an outlay at Rs 2.21 Lakh crore, with proactive steps to boost growth for highways sector, is also expected to provide a fillip to outdoor advertising.

Presenting Budget for 2016-17 in Parliament, Jaitley said infrastructure is one of the strong pillars of economy and "exemplary" and "proactive" steps by government to remove hurdles resulted in India awarding highest ever road contracts in 2015 as well as highest ever sales of motor vehicles which are clearly "signs of growth".

Sanjeev Gupta, MD, Global Advertisers, "Outdoor advertising is primarily dependent on the infrastructure of the country. Good roads, flyovers, sky-rises, public transport, utility spaces... all of these contribute towards the development of the advertising industry. With Our government's promises on "Development", we hope to see a larger picture of the government's "Make in India" project. We wish to see speedy action on the development of Smart Cities and Bullet Trains. With this budget, we hope there is generation of better opportunities for entrepreneurs, more jobs for the youth and less pressure on our pockets."

However, on the negative side there was an expectation, based on what the Finance Minister said in the past, that corporate tax rates would come down. That was not to be seen for most large companies.

Meanwhile, introducing double taxation on dividends is also a negative. "In balance this seems to me to be a mixed bag budget with a positive bias. If it is able to spur overall economic growth, we could see good times ahead for the advertising and media sector," Ashish Bhasin opined.

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