Sweet sour news for ad industry - say ad men

MUMBAI: The advertising industry hasn't reacted well to the fact that the service tax has been increased from 5 per cent to 8 per cent. However, there is hope that the benefits given to consumers demand might prop up sales and in turn increase ad spends.

Madison Communications India CMD Sam Balsara:

"The need of the hour is to stimulate consumption. The cost of television advertising is already very high because of fragmentation and will now further go up by 3 per cent because of the increase in service tax. This is going to be a dampener for the industry. The government is consistently failing to exploit the potential of advertising as a fuel to drive growth in the economy."

Ulka client services director MG Parameswaran, who is also Ad Club Bombay chairperson - programmes committee:

Parmeswaran says the increase in service tax is a dampener for the advertising industry. The money otherwise spent on media by clients is not going to increase, he notes as ad budgets are not likely to see an increase in the coming year.

On the other hand, the reduction of excise duties on items like motorcycles, soft drinks and biscuits will translate into an increase in consumer demand, which could have an indirect but positive effect on advertising around these products.

Reduction of duties in sectors like health care, pharmaceuticals and information technology will mean that these sectors which have just discovered the power of advertising will be spurred to spend more on advertising across different media, says Parmeswaran.

Initiative Media president and Lowe group India director Ashish Bhasin:

Bhasin says: "It is a good budget from the common man but there could have been some more benefits and relief. For the entertainment industry, there could have been more sops. The budget has attempted to make improvements in the procedural areas - for instance the VAT related reforms and other simplication. The service tax levels increasing to 8 per cent will definitely affect the advertising industry."

Optimum Media Solutions executive vice president Amit Ray:

Ray says: "As far as I am concerned, the service tax didn't exist some time back and now it has become eight per cent - for me the increase has been from zero to eight.

"However, generally speaking, consumers will benefit from the budget and this will encourage spending and benefit marketers of products and services."

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