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DTH & cable ops miffed as AAP hikes entertainment tax in Delhi

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MUMBAI: Delhiites can expect to dole out more cash for their weekly dose of entertainment courtesy the new budget presented by the Arvind Kejriwal led Aam Aadmi Party (AAP). Under the new budget, while entertainment tax (ET) on cable TV and direct to home (DTH) in the national capital has gone up from the current Rs 20 to Rs 40, that for cinema halls has been hiked by 20-40 per cent. This, even as Maharashtra based cable operators, paying a hefty sum of Rs 45 as entertainment tax, are still fighting a case in the Bombay High Court for slashing the taxes, with little respite.



According to Delhi based cable operators, while there aren't any issues per se with increasing the entertainment tax, their grouse is that the government should have devised a way of collection from consumers before increasing the ET.

As for now, it is the local cable operator who collects the ET from consumers and then gives it to the multi system operator (MSO). The system sees a number of leakages and blame game. While LCOs lament that the customer does not pay ET, MSOs believe that the LCO fail to pass on the collected ET to them. Since the onus of finally submitting the ET collection to the government is on the MSO, not surprisingly they are held guilty more often than not.

While Delhi fell in phase I of DAS, where interconnect agreement should have been signed and billing started, thus protecting leakages, the same has yet not been achieved. Thus, increasing the ET by Rs 20 seems no less than a burden to both LCOs and MSOs.

"The government can increase the entertainment tax, but then what are the measures it has put in place to be able to facilitate collection," says Cable Operators Federation of India (COFI) president Roop Sharma.



Sharma believes that the government should give incentives to cable operators for collecting entertainment tax from consumers. “The LCOs are the biggest sufferers in the whole process as they face the task of extracting this additional amount from their customers,” she adds.

According to a Delhi based MSO, hiking entertainment tax is an unwelcome move. “With the earlier tax system, the exact amount was not being collected and this resulted in the MSOs getting penalized. The LCOs will not be able to collect the extra money from the ground, which will mean that the MSOs will have to pay the remaining from their own pocket,” the MSO tells Indiantelevision.com on condition of anonymity.

The MSO is also of the opinion that while digitization was aimed at bringing in transparency, which ensured lesser leakages, hiking taxes and thus increasing the cable bill was unjustified.

DTH Operators Association of India president and Videocon d2h CEO Anil Khera said, “The recent announcement of doubling of entertainment tax on cable TV and DTH services made by the Aam Admi Party government seems unfair and illogical. DTH as a platform is considered as critical to citizen’s right to information, news, education and entertainment. The sector is already saddled with high tax, where 33 per cent of revenues are taxed between the Centre and State. DTH operators that comprises Tata Sky, Dish TV, Airtel Digital TV, Videocon d2h, Sun Direct and Reliance Big TV, will have no choice but to hike their tariffs in Delhi to accommodate this hike in entertainment tax and the load will finally fall on the customer. By dropping electricity prices on the one hand and increasing entertainment tax on DTH on the other, does not seem like a move in favour of the aam aadmi! Is this how we plan to achieve a balance budget and reduce fiscal deficit?”

On the other hand, Sharma informs that while the hike in entertainment tax is applicable for private DTH players, DD Freedish has been kept away from it. “Surprisingly the DD Freedish service is not taxed, but the same channels forced upon the cable TV networks will demand a tax. It appears there is no co-ordination between the central and Delhi government and in the bargain the aam aadmi has to suffer,” she adds.

MSOs and DTH players will now have to come up with a campaign to inform consumers of the hike in entertainment tax, so that it is easier to collect from the ground.

This also could be the trigger for going prepaid, something that Mumbai based MSO IMCL has started, where the customers pays for the channels they want to watch in advance. Defaulters, if any, face disconnection of set top boxes. The mechanism can at least help in collection and not make the LCOs or MSOs fall in the defaulter category. However, one thing remains unchanged, which is that the consumer will surely have to have deep pockets for their entertainment needs and demands going forward. 

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