IBF issues ultimatum to advertisers on service tax

MUMBAI:After discussions with a few "big advertisers" that seem to be going on and on with no resolution in sight, the Indian Broadcasting Foundation (IBF) is attempting to grab the bull by the horns. Some 10 days ago, the IBF issued letters to advertisers through the Advertising Agencies Association of India (AAAI) and Advertising Standards Council of India (ASCI) that from 1 September, no ads will be accepted for TV channels unless a service tax is also included in the final bill.



This is being done by broadcasters to neutralise the 5 per cent service tax that they have to pay as per announcements made by former finance minister Yashwant Sinha in his Budget speech.



The issue of payment of service tax has been the cause of a major rift among the advertising community and broadcasters with the ball being passed back and forth between the two sides.



The broadcasting industry's consistent stand has been that the service tax, being indirect in nature, would have to be borne by the end-user, namely the advertiser. In contrast, the advertising community's argument has been that the extra burden would add to its costs and have an adverse impact on total advertisement spend by the industry.



According to an industry source, however, 90 per cent of the clients are already paying the tax. It is only a few of the really big advertisers - the likes of Hindustan Levers, Pepsi, Coke, etc. - who are still continuing to dispute it. The letter issued by the IBF states that from 1 September onwards, broadcasters will not accept any business unless the tax is included in the release order (RO).

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