Advantage foreign broadcaster in Budget 2002

It was brief to say the least. The amount of time that finance minister Yashwant Sinha devoted to the entertainment sector in his speech to parliament while presenting the Union Budget 2002-2003 that is.

The key announcements Sinha has made relating to the entertainment, film and television industry in the Union Budget announced today are:

* Rather than removing that 5 per cent service tax as sought by the entertainment industry, cable operators as well as event management companies have also been brought under the purview of this levy.

*Customs duties on studio equipment and earth stations has been reduced from 35 per cent to 25 per cent. Specifically referring, to the duty reduction on earth stations, Sinha said this was keeping in mind India's potential to become the uplinking hub for South Asian countries.

*Budgetary allocation to the information & broadcasting ministry up 22 per cent to Rs 4150 million.

*Overseas joint venture investment limit for Indian companies has now been upped to 50 per cent of net worth from the earlier 25 per cent. This is likely to work as an incentive to Indian entertainment companies to set up subsidiaries abroad.

*A 50 per cent tax exemption to the those operating multiplex theatres for the next five years. The catch appears to be that the relief is applicable only for multiplexes that come up in rural areas.

*Corporate tax on foreign companies operating in India brought down from 48 per cent to 40 per cent. However, it should be kept in mind there is a 5 per cent surcharge on corporate tax that has been slapped across the board. This means a 2 per cent addition to be factored in. Therefore the actual payout is 42 per cent.Still, considering that corporate tax on Indian companies today stands at 35 per cent, this is likely to further incentivise foreign players to set up wholly owned subsidiaries in India.

All in all therefore, broadcasters like Zee, Star and Sony that are basically foreign owned entities, should not have too much to complain about. The same cannot be said for the cable industry though.

We will be adding more details as and when they become available to us.

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