MSOs brought under service tax net

NEW DELHI: Multi System Operators have one more issue to add to their "litany of woes". The government has brought under the expanded tax ambit, MSOs as well.

In the budgetary proposals of finance minister P Chidambaram, which increased service tax from 8 per cent to 10 per cent, it has been specifically explained that cable operator service will include MSOs.

A Delhi-based representative of a MSO said, "We are already under so much financial pressure and now this added taxation, if true, would only add to our burden."

CONFUSION OVER CABLE OPERATORS : The Budget papers add --- in a confusing way, though --- that service tax exemption that had been granted earlier has been withdrawn on "broadcasting service provided by cable operators."

What adds to the whole confusion is the fact that cable operators say they have been paying service tax of eight per cent for the last two years and that the finance ministry has goofed up by mentioning them.

According to Vikky Chowdhry, president of National Cable & Telecom Association and an independent cable operator in Delhi, "The cable ops have been paying service tax since August 2001 and so withdrawing of the exemption does not make any sense."

More importantly, Chowdhry pointed out, that with the sector regulator-mandated freeze on cable service prices still continuing, it would be very difficult for cable ops to absorb the increased percentage of service tax.

"The consumer would yell if we try to pass on the increase to him, which would be difficult in the first place, and it would be hard for us to absorb the cost. We have been caught between the deep sea and the devil."

The confusion has arisen as the then FM had put in abeyance inclusion of cable ops in the service tax net in 2001. Subsequently another notification had been issued in this regard to incorporate the cable ops, according to Chowdhry, and the presdent mandarins in the finance ministry goofed after, may be, reading some old government note.

Even if cable operators' side of the story is taken with a pinch of salt, the government has not made it clear whether the `broadcasting service by cable ops' means re-transmission of TV channels or the video channels that cable operators show to air movies, news-based programming and, sometimes, even live local events like Ramleelas.

Attempts made by to get a clarification on this from finance ministry officials drew a blank.

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