IBF to discuss service tax issue this week

NEW DELHI: The issue of service tax is once again rearing its head and the broadcasters feel that a tough line needs to be taken. The contentious, but unresolved issue, which has been dogging the media and advertising industry since 2002, would be discussed by the Indian Broadcasters’ Foundation (IBF) at a board meeting slated to be held later this week.

 

 

According to sources in the broadcasting industry, if all the members of the IBF agree, then it is likely to be decided that those clients who are not including the eight per cent service tax in the release order would not be entertained and their ads would not be aired.

It is also being contemplated that a provision for a separate entry for service tax be made on any business transaction paper that would enable broadcasters to collect the service tax from clients and forward it to the authorities concerned.

However, taking such a tough stance would need a lot of willpower on the broadcast industry’s part as such "experiments" tried out earlier had fizzled out no sooner had they been kicked off.

In September 2002, some top channels, including Star, Sony and Zee TV, had stopped airing ads of Hindustan Lever products as well as Colgate from the first of the month. Reason: these are the two biggest advertisers who were still not adding the then five per cent service tax (imposed by the government) in the final ad release order.

But even at that time, not all broadcasters blacked out ads of "truant" companies. Looking at the present case scenario, Prasar Bharati, for example, is still undecided on what course of action to take where defaulters are concerned, This is in spite of having sent out a letter to all advertisers to this effect last week. Prasar Bharati has recently said that those advertisers who book bulk time on DD News would be exempt from service tax.

Harking back to the situation in 2002, the boycott did not continue for long and soon most advertisers were back on TV channels. The pressures of revenue losses took their toll. Taking the case of HLL, its annual TV ad spend in 2002 was streets ahead of any other advertiser at Rs 1.5 billion. On Star alone that worked out to Rs 2 million every day then.

Can the broadcasters bite the service tax bullet in 2004?

Keep tuned in for more details later this week.

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