The Union Budget 2016 which was presented yesterday centered on 9 key pillars----agriculture, rural sector, social sector, education and job creation, infrastructure investment, financial sector reforms, governance and ease of doing business, fiscal discipline and tax reforms.
Although there wasn’t too much direct impact on media and entertainment The focus on rural and start-up development could have an indirect effect on the sector, especially on the back of consecutive droughts and shrinking rural demand.
"It appears that there is very little directly for the M&E sector. Except for the point about subjecting sales of spectrum to service tax. For ENIL however, the service tax will be fully set-off, so overall impact should be neutral. This aside, there is a provision for higher Dividend Distribution tax that would affect all corporates, not just those in M&E," said Prashant Panday, CEO and MD of ENIL -Radio Mirchi.
Harrish Bhatia, CEO of MY FM also agreed that none of the issues highlighted earlier were addressed, for example, exemption of service tax as is the case for print publications, OTF to be collected in installment like in telecom industry and waiver of custom duties for import of broadcasting equipment.
On the government’s decision to levy service tax on radio spectrum, he said, “We do not appreciate this move, there is no service that the government is extending to radio broadcaster by providing spectrum.”
Partha Iyengar, VP & Gartner Fellow and Country Manager Research (India) of Gartner, said the budget had a number of "baby steps"; focus on rural skills development and improvement of rural digital literacy, incentivizing the creation of domestic IP and driving domestic innovation, focus on infrastructure outlays, creating a favourable environment for startups, continuing the ‘Make in India’ focus with a few more specific ‘catalysts’ announced in the budget, etc.
"As always though, the devil is in the implementation of these schemes. It is good to see a mention of review of program effectiveness as one of the goals in the budget, but till we see that followed up religiously it is hard to give it credence,” he added.
Zafar Rais, CEO of MindShift Interactive said the budget made for “mixed reactions” though he admitted that it had gone beyond to encourage entrepreneurship across all boards and also of specific categories like the SC/STs.
“The government in the past had mentioned to cut down the corporate tax and has proposed with regard to small units having a turnover of Rs 5 crore, reduction in corporate tax rate from 30 per cent to 29 per cent. This should prove to be rather advantageous. Service tax getting an increase from 14.5 to 15 per cent in the form of the Krishi Kalyan Cess is not an affirmative highlight as it adds pressure on negotiations, when looking at net billings that clients demand. From a media and advertising standpoint, an increase in service tax, especially on electronic goods doesn't seem favourable at all. We would have preferred a more future-focused policy regarding this particular aspect," he added.
Sanjeev Gupta, MD of Global Advertisers added that not increasing taxes was a major positive, especially given the pro-development stance taken by the government and the allotment of money to rural infrastructure, railways and road development. "We are also seeing great potential in expanding our reach to small cities now. The finance minister has also hinted at amending motor vehicles act for better transportation facility in the country. This may give us the opportunity to position our ads more effectively while on the move. We feel that in this critical economic condition, the budget has been so far satisfactory for the advertising industry,” he commented.
“As part of the budget proposals, India has levied an equalisation levy - what is known as ‘google tax’ globally. The tax @ 6 per cent of the consideration will apply on services relating to online advertisement, provisions on online ad space or other facility or services for the purpose of online advertisement, when such services are provided by a non-resident to either an Indian resident or a non-resident having a permanent establishment in India, the payer for these services are required to deduct 6 per cent prior to making the payment. This is the first time that online services are being specifically taxed in India on such differential basis. The impact of this levy will be that firstly, the income of foreign websites/ apps will now be liable to this tax. The taxes are levied under separate code and service providers may not be able to claim credit for the same in their home country. Additionally, there may be additional scrutiny on such transactions under Income Tax law,” said Rakesh Jariwala, Tax Partner, Media and Entertainment, EY
"FM gives impetus to the PM’s ‘Make in India’ dream by rationalising Customs and Excise duty rates on inputs, components used in IT, Defence and Textile sectors. Auto industry will be impacted by the whammy of infrastructure cess ranging from 1 per cent to 4 per cent levied on manufacture of motor vehicles," opined Amit Bhagat, Partner (Indirect Tax) at PwC India.
Siddhartha Roy, CEO of Hungama.com said, "The Union Budget 2016 has paved the way for rural digitization with a focus on digital literacy. The aim to connect 6 crore households will provide a stronger reach and deeper penetration for digital and technology driven services in rural India, thus allowing residents a plethora of services. The digital literacy scheme announced by Mr. Arun Jaitley in rural India will not only give rise to increased manpower but also boost employment generation. The budget is an indication of the government's resolve towards the ‘Digital India’ scheme."
Neel Ratan, Partner and Leader (Government and Public Sector) at PwC India commented, "Renewed focus on ensuring ease of doing business will reinforce positive investment climate for global investors as well as foster a culture of start-ups with the much awaited amendment of Companies Act. This will have a cascading effect with youngsters becoming job creators rather than job seekers, constructively channelizing the energy of India's youth and catapulting nation into the league of developed nations. National Career Service is emerging as a robust go-to-portal for job seekers; the move to inter-link National Career Service with state employment exchanges will eliminate bottlenecks and fast-track the filling up of job vacancies. Moreover, the announcement of 100 model career centres for National Career Service Portal will revive the traditional job search and massively add to the reliability of the portal, making it the preferred mode for searching jobs."
Bhavin Turakhia, CEO and Co-founder of Directi praised the government's intent on revitalizing agriculture, infrastructure, skill development and higher education sectors.
"Amendments in the Companies Act and the ‘Stand up India’ scheme will boost the entrepreneurial ecosystem. Most importantly, the government has indeed offered unique opportunities to start-ups, categorizing them as critical partners for the ‘Make in India’ programme. The proposed 100 per cent tax deduction for new start-ups for the first three years, along with the speedy registration mechanism is quite noteworthy,” he added.
Anticipating this demand, Sanjeev Gupta, MD, Global Advertisers, says, “Amusement parks have now become a new source of entertainment for discerning Indian families, given the fact that they have more disposable income and are ready to spend on leisure. As per the data, this sector is going to touch $1.8 billion with nearly 500 new parks by 2020. With this kind of potential, we are hopeful to see great demand of outdoor advertising in the near future."
Mandeep Malhotra, Co-Founder of The Social Street, says spends (on outdoor) might have gone down by as much as 50 per cent this year as compared to last year. Sanjeev Gupta, MD of Global Advertisers, puts the number even higher, at 60 per cent. Even Noomi Mehta, Founder and MD of Selvel, agreed that very little activity has been seen by brands around the IPL, even though outdoor advertising, otherwise, has increased.
However, Atul Shrivastava, COO at Laqshya Media, agreed with Mehta's assessment that OOH spending has increased though he admitted that it is difficult to "correlate them (OOH Spends) with IPL. "In the previous years, spends on other mediums including OOH used to come down. But this year it is normal and better. So we can say that activities on OOH have also increased (compared to last year). In terms of percentage, there is a growth of 8-10 per cent (approx) in OOH spends compared to last year around this season.
The importance of TV, where a 10 second ad spot is going for around 5.5-7 lakh, according to sources, is highlighted by the example of Housing.com, which has launched its first ever TVC campaign during the IPL. Last year, the company had preferred to take the digital route but this year, the company has decided that TV will be its main focus area for advertising. When asked whether the company has any plans to utilize other mediums, Nikhil Rungta, CMO at Housing.com said, "For now, we have only taken space on TV and will be supporting it through digital properties. There are no plans for using other mediums or Hotstar, etc. right now. The main focus this year will be TV."
