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MUMBAI/NEW
DELHI: The deadline was 1 September. And true to the warning
issued earlier, the top channels including Star, Sony and
Zee TV have stopped airing ads of Hindustan Lever products
as well as Colgate from yesterday. Reason: these are the
two biggest advertisers who are still not adding the 5 per
cent service tax (imposed by the government) in the final
release order of ads. Nearly all the other main FMCG companies
have fallen in line, ad and broadcasting industry sources
say.
The broadcasters, including Doordarshan, under the aegis
of Indian Broadcasting Foundation (IBF), had decided that
advertisements from those clients would not be accepted
for airing from August-end where the 5 per cent service
tax is not included.
Though HLL's media buying agency Mindshare Fulcrum has been
insisting that the service tax was being included in the
final payment, the broadcasters' stand has been contrary
to this. Vikram Sakhuja MindShare Fulcrum South Asia managing
director maintained that MindShare was following the Indian
Society of Advertisers (ISA) directive on the matter. Sakhuja
says: "In case the broadcaster requires that the final bill
separates the service tax component and so long as the overall
rate is part of the gross negotiated rate that we have reached
with the broadcaster, then we are agreeable to that." Sakhuja
added that negotiations to sort out the matter were on and
that he expected an amicable resolution to the whole issue."
A senior executive of the IBF, whose present chairman is
the chief executive of Prasar Bharati KS Sarma, today told
indiantelevision.com that the advertising agencies and their
clients have to fall in line as the broadcasters would not
bear the additional burden of 5 per cent service tax.
Another senior industry source said other big FMCG clients
like Procter & Gamble, Nestle, Coke, etc who had earlier
not been willing to accept the IBF's contention on the matter
had come on board.
Two relatively smaller advertisers that are also being blacked
out are SmithKline Beecham and Marico. The case of Pepsi
is not clear still with a representative of one broadcaster
saying they had agreed in principle though not signed on
yet while another says Pepsi is also on the blacklist.
Still, not all broadcasters have promptly resorted to blacking
out ads from certain companies. Prasar Bharati, for example,
is still undecided on what course of action to take where
defaulters are concerned though it had sent out a letter
to all advertisers to this effect last week.
A
senior Prasar Bharati officer told indiantelevision.com
that Doordarshan is yet to decide on the future course of
action, though other broadcasters may have started taking
action. Moreover, Prasar Bharati, despite becoming an autonomous
body, still works like a government body where snap decisions
are rare. The top honchos of Prasar Bharati, it is learnt,
were out of town.
But
not all advertisers and their agencies have become the focal
point of the controversy as one chief executive of a media
company pointed out.
According to Haresh Chawla, CEO of Television Eighteen Ltd,
which has a joint venture with CNBC Asia for running the
CNBC India channel: "I don't think everybody (ad agency
and advertisers) is at fault. At least those who are advertising
on CNBC India are including the 5 per cent service tax (with
the ad release order). We have had no problem on this front."
The issue of service tax has been a vexed one from the time
former finance minister Yashwant Sinha had made an announcement
to this effect in Budget speech a couple of years back.
While the broadcasting industry has maintained in several
presentations to the government that the additional 5 per
cent service tax may hamper the growth of the still-nascent
broadcasting industry in India and that this burden should
be borne by the advertising industry, the latter had been
taken a different stand - why should the ad industry pay
another 5 per cent service tax as it already pays the service
tax which was imposed sometime in the mid-90s.
To pay nor not to pay, now, is the big question which is
haunting some of the real biggies (and some not so big)
of the ad industry.
See related headline:
DD
also issues ultimatum to advertisers on service tax
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