FICCI wants hike in FDI cap for M&E sector

NEW DELHI: The Foreign Direct Investment (FDI) limit for News and Current Affairs television channels should be raised to at least 49 per cent in accordance with the recommendations of the Telecom Regulatory Authority of India in 2008.

Reiterating this, the Federation of Indian Chambers of Commerce and Industry (FICCI) has in its pre-budget memorandum said that it is "also imperative to align the foreign investment caps in broadcasting carriage with that of Telecom, in keeping with a technology agnostic approach so that the industry can achieve its full potential.?

FICCI said in its memorandum to Finance Minister Pranab Mukherjee that it is a settled economic position that FDI is a far more superior purveyor of funding compared to other means of foreign investments, given its inbuilt long term commitment.

There is a need to provide fillip to the importation and indigenous manufacture of set-top boxes (STBs) and so import and excise duties on STBs should be subjected to a moratorium for three years coinciding with the sun set date for analogue transmission as laid down by Trai in its latest recommendations on digitisation, FICCI said in the memorandum.

It added further that the service tax applicable to the DTH industry should be reduced by 4 per cent for three years to enable it to sustain amid the multiple taxation regime afflicting the sector as some States have levied entertainment taxes on such services as well.

The industry body said the cable sector needs to be given "Infrastructure" status in order to garner domestic funding. The cable industry that has grown for the last twenty years in an unorganised manner has been catering to 90 million households by deploying out dated analogue technology.

"This has resulted in considerable loss to the government as tax collections have suffered owing to large scale under declaration of subscriber base by the cable sector. This lack of transparency has resulted in banks and financial institutions steering clear from the cable sector, thereby impairing quality of service, technological upgradation and the required switchover to digitization with addressability," FICCI said.

Trai had conservatively estimated that a sum of Rs 500 billion is required to ensure the transition from analog to digital technology in the cable sector.

"Granting of infrastructure status to the broadcast infrastructure providers namely teleport operators, multi system operators, local cable operators, DTH operators, et al, shall go a long way to ensure well rounded growth of the sector," FICCI said.

Noting that the Finance Act 2010 had introduced a new Service Tax category for Cinematographic/Copyrights services, FICCI said that double taxation - service tax and VAT - was being levied with some states having classified copyright as ?goods?. It said there should be a mechanism to prevent this situation, as it was causing hardship to the industry. This was hurting the entire entertainment industry including cable TV sector and cinema.

Under the Act, the taxing entry for copyright services, temporary transfer of, or permitting use of/enjoyment of copyright has been made liable for Service Tax. "Effectively it appears that all form of exploitation of copyright by the rights holder will attract the levy of Service Tax," the industry body said.

In its recommendations relating to cinema, it said necessary equipment and hardware for film production must be allowed to be imported without the additional burden of customs duty. The Draft Constitution Amendment Bill 2011 for Goods and Services Tax imposes a significant burden on the film industry by allowing the local bodies to levy a supplementary entertainment tax, over and above the GST.

To avoid complexities of taxation which is one of the main objectives of GST, FICCI recommended that entertainment tax should be fully subsumed in the GST without creating a window for their levy at the local level.

It also said multiplex operators should be exempted from levy of service tax on property rentals, till GST is introduced, and entertainment tax is fully subsumed in GST, to result in seamless pass-through of such indirect taxes. Cinema exhibitors should be exempted from levying service tax on Intellectual Property Rights to be transferred to exhibitors (Multiplex owners).

Multiplex operators should be exempted from payment of duties on import of cinema equipment, till GST is introduced, and entertainment tax is subsumed in GST, to result in seamless pass-through of these indirect taxes.

The film industry should be entitled to take full credit of certain ?input services? which are commonly used for non-taxable as well as taxable activities.

Asking for a ten-year tax holiday for the animation industry, the FICCI reiterated its demand for setting up Centers of Excellence for the Animation, Gaming and VFX Industry which also offers opportunities for applied and commercial and others type of arts, on the lines of Indian Institutes of Technology and Indian Institutes of Management.

There was need to lift service tax on studios developing original content and exempt Import Duty on Hardware for a Period of 10 Years.

There should be a provision of 50 per cent reimbursable MDA (Market Development Assistance) for travel and registration fees to international market events. The Government should extend support under MDA/MAI activity to exhibiting Indian companies by setting Indian Pavilions in the world markets. There was need to assist local production companies to go to international markets, collect and disseminate information, and help support the infrastructure needed for a healthy media market to develop.

FICCI also said that to promote the domestic gaming market, Excise Duty on local manufacture should be brought down from 12.5 per cent to zero duty (similar to film and music industry). This will enable countervailing duty (CVD) to be brought to zero as well. The effective reduction in taxes would be around 15 per cent.

Import duty on consoles (Gaming hardware), which will increase the installed base to enable the local developer ecosystem to flourish, needs to be brought down to zero duty.

The industry body wanted mandate to be given to commercial bankers to treat animation sector on priority. This will enable them to provide funds at concessional rate.

Furthermore, encouragement should be given to entities through reduced tax rates/incentives (exempt withholding taxes for overseas payments to foreign artists stationed overseas) for exploitation of own developed content in overseas markets.

The MAT applicability for units undertaking animation work in Special Economic Zones should be withdrawn to encourage export of animated contents.

FICCI wants the government to introduce subsidies like a CNC Fund (in France) to fund animated content co-produced and developed in India to enable Indian producers to be competitive on a global scale.