(3 March 2007 8:00 pm)

NEW DELHI: The measures suggested in the budget proposals for 2007 and the latest government notifications issued on 1 March, will not only make manufacturing of STBs dearer, they will also escalate manifold the price of broadcasting programmes.

These are the conclusions, an exclusive analysis for indiantelevision.com by a senior tax expert on the matter have thrown up.

The exemption from CVD has been withdrawn on specified parts of STBs, like tuners, RF Modulators and remote controls, according to Essel Group vice president and MSO Alliance leader Arvind Mohan.

Mohan handles all the tax issues for the Esssel group.

"Earlier, the exemption on CVD was granted by Notification No.21/2002-Customs. However, this has now been withdrawn vide Notification No.20/2007 March 1, 2007," Mohan tells indiantelevision.com.

Accordingly, he argued, now 16 per cent of CVD would be levied on the import of these parts. To that extent, the domestic production of STBs would become costlier.

"It is quite surprising that though the CVD exemption benefit has been withdrawn from the specified part of STB, the exemption from levy of 4 per cent of Additional Duty of Customs in respect of cell phone parts, components and accessories, as was available only till April 30 2007, has been extended through the present budget proposals till June 30, 2009.

"It is a clear-cut discrimination between the Telecom Industry and Broadcasting & Cable Industry," Mohan says.

Mohan shows also that the notification regarding the broadcasting sector would also shoot up their costs dramatically.

Concessional rate of custom duty at the rate of 5 per cent was levied on the following items used in broadcasting sector vide Notification No.21/2002, on 14 major items. These are

• Television cameras (with portable field video recorders (professional grade);
• Audio recording equipment;
• Tabletop post production video editing machines;
• Four-source editing controllers to control editing machines;
• Eight-channel video mixer/switches;
• Special effect generators for fading and superimposing of text and graphics;
• Time-base correctors/frame synchronisers;
• Broadcast standard 3-D computer graphic systems;
• Professional grade colour video monitors;
• Portable lighting equipment with lamps for shooting in low light situation;
• Professional-grade photographic cameras of all formats;
• Darkroom equipment including enlargers;
• Computer control editing machines;
• And spares and accessories of above mentioned equipment as permitted by the Deputy Principal Information Bureau in the Ministry of Information and Broadcasting.

However, these concession have now been withdrawn vide Notification No.20/2007-Customs. Accordingly, now the basic custom duty at the rate of 10 per cent shall be applicable on all these items," Mohan says.

"Consequently all the related duties and taxes would also go up. What you must remember is that professional TV cameras, audio recording equipment, video editing machines, etc. are being regularly used by various channels, specially news channels in their day to day working. This move is likely to adversely affect all channels, including news channels."

He points out also that exemption from Customs Duty has been withdrawn on recorded magnetic films used for producing TV serials.

These items will now attract peak rate of custom duty at the rate of 10 per cent.

Similarly, the Excise Duty exemption on recorded video cassettes, U-matic tapes, Betacam, any similar format, etc. intended for TV broadcasting, has also been withdrawn and excise duty at the rate of 8 per cent has been imposed.

"This move is also going to adversely affect the broadcasting sector," Mohan argues.

Despite announcements by the government and reiteration by the Telecom Regulatory Authority of India, on the initiative to introduce digitisation in all the major cities of India by 2010 (Commonwealth Games), no fiscal concession has been extended in order to catalyse the process, he asserts.

"This is clearly contrary to the approach adopted by the government for expanding telecommunication services, which were duly-supported by a lot of fiscal incentives and some of these incentives are still continuing.

"In order to create a level playing field between IT, newspaper and TV sectors, it is imperative that similar fiscal concessions are extended to broadcasting and cable sector also, to realise the objective of digitisation," Mohan argued.

He stresses that while no fiscal concession has been extended for digitization initiative despite the representations and recommendations of Trai and the information & broadcasting ministry, a lot of concessions have been accorded to the delivery of content to cinema in digital form namely, which he felt was also discriminatory action.

As examples, he shows that digital cinema development projects have been notified as project imports under heading 9801 and will thus attract the project rate of 7.5 per cent customs duty.

The services provided in relation to delivery of content of cinema in digital form after encrypting electronically have also been exempted from the payment of service tax.

"Similar concessions are required to be extended for promotion digitisation of broadcasting and the cable sector.

"World over, there has been a migration from analogue to digital regime as analogue is increasingly becoming obsolete. In all countries, various concessions in the form of subsidies, fiscal incentives, tax holidays for establishment of digital infrastructure are being extended by the respective governments, Mohan says.

He clearly asserts that creditable role of the government in the process of digitisation, but says that if the targets are to be achieved in the stipulated timeframe at the national level, the necessary support to boost digitisation efforts is required to be extended by the government, as have been done in case of telecom sector.