IBF ruling on service tax as separate component now in effect

MUMBAI: No more bouncing of the service tax ball hither and thither. The Indian Broadcasting Foundation (IBF) board has ruled that effective today (1 July 2004), all its members would charge service tax on all releases and all other levies, which will have to be borne by the client or agency.



The argument is that since service tax per se is an indirect tax, it is therefore the prime responsibility of the end user, who here is the client, to pay it. As per the government's notification, IBF claims that as broadcasters who come under the purview of the Service Tax Act, they would essentially only need to collect the same from the client and pass it on to the Central Government. Hence today onwards, broadcasters have requested agencies to bill the service tax as an exclusive component, and not inclusive of the negotiated rate as was practiced earlier.

Interestingly, broadcasters had put forth the same stand in 2001, but had softened up later "for some clients", but with the 8 per cent service expected to be increased to 12 per cent in the Union budget that finance minister P Chidambaram will table on 8 July, broadcasters are getting increasingly edgy.

A senior industry executive that indiantelevision.com spoke to said that the "internal note" that had been issued was "to ensure compliance" from all channels that this edict be followed across the board, admitting also that there were a few channels that had not been adhereing to the IBF diktat. "All channels have been asked to collect release orders and it should be mentioned in the release order that service tax as applicable is over and above the deal value," the executive said.

He, however, chose to downplay the issue, saying, "We have never had a service tax problem for near on two years now. Except for one or two clients which have been camouflaging it by saying the deal is inclusive of service tax."

It may be recalled that an ad had been issued recently in all leading dailies by the directorate of publicity and public relations, customs & Central excise, specifically clarifying that service tax has to be paid by the client.

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