MUMBAI: Come the end of the next advertising billing cycle, an age
old practice is likely to come to an end in the Indian broadcasting
industry, if TV channels have their way.
agencies will start receiving bills net of agency commissions, rather
than gross bills (with the 15 per cent agency commission deducted
from the gross amount) for TV commercials and ad spots carried by
Indian Broadcasting Foundation (IBF) has communicated this to the
Advertising Agencies Association of India (AAAI). So what has forced
the IBF to attempt to do away with a long standing practice of gross
happened is that quite a few broadcasters received notices from
the income tax department towards end-March 2013 claiming unpaid
TDS on the 15 per cent agency commissions that is mentioned in the
gross bill amounts that broadcasters normally send to agencies.
have asked for retrospective TDS from some broadcasters over the
past three years on the 15 per cent agency commission," says
IBF president and Multi Screen Media (MSM) CEO Man Jit Singh. "We
have not calculated the exact amount of money this would entail,
but it is substantial and could cripple the industry and hence we
have been advised to move to net billing."
past president of AAAI and Draftfcb Group chairman India Nagesh
Alai says that "this incident cannot be used to rationalise
or force any move to net billing. It will adversely impact the advertising
industry and hence is not acceptable to AAAI. It's a well-established
principle under income tax laws that the payer of monies has to
deduct TDS. The clients pay the agencies after deducting the TDS
and thereafter the agencies pay the media the net amount due to
them. Hence, there is no obligation on the media to deduct any TDS
from agencies. This is well established by a circular issued by
the tax authorities in 1995, when AAAI had sought a clarification.
Hence, the notices raised on the broadcasters by the tax authorities
on the specious argument that broadcasters have not deducted TDS
from agencies, is untenable and not maintainable under law. It has
to be argued on merits."
says that broadcasters are broadly in agreement with the AAAI and
that they are going to go in appeal against the notices. "We
are going to argue our point. But who is going to pay the 50 per
cent or so of the claim amount that we will have to deposit with
the tax authorities until the appeal is heard and judgment in our
favour delivered? Our cash flow position is going to be hit hard."
says that broadcasters "should not be panicking as a result
of such wrong claims. As business partners, AAAI and IBF will be
working together on this, as always. KPMG and E&Y have been
roped in to address the issue on merits."
adds that "as an aside, it's a matter of fact that such tax
notices and claims, based on irrational disallowances, invariably
emanate in February or March, driven by revenue targets of the tax
once again says that he concurs with the AAAI stance "but our
tax advisors have said there is no guarantee that even if our appeal
is upheld this time, we will not be issued notices from the income
tax department again. We can't be going in appeal again and again.
Hence we are quite firm on our decision to go ahead with the net
billings system from the next billing cycle."