The Hindu : Tamil Nadu / Chennai News : `Rationalise taxes on entertainment industry'

Online edition of India's National Newspaper
Monday, Dec 20, 2004

Tamil Nadu

Tamil Nadu - Chennai

`Rationalise taxes on entertainment industry'

By Our Special Correspondent

CHENNAI, DEC. 19. The former Supreme Court judge, S. Mohan, on Saturday called for rationalisation of taxation of the entertainment and music industries, keeping in view the confluence of technologies they represented and the creativity that formed the core of their value.

Inaugurating a workshop on `Media and entertainment industry - taxation and economic aspects,' organised by the Hindustan Chamber of Commerce, he said video compact discs (VCDs) should be treated on a par with audio CDs in the matter of excise to discourage piracy, which was threatening the industry's very existence.

Lower import duties levied on certain entertainment products bought in as air or sea cargo should be extended to passenger baggage. Advance tax rules should be changed appropriately in the case of film producers and distributors in view of the highly uncertain nature of the commercial prospects of films, he observed.

Anita Sumant, chairperson of the expert committee on taxation of the chamber, said the entertainment tax rates varied between 21 per cent and 125 per cent among different States. Tamil Nadu alone had included "amusement parks" in the concept of taxable entertainment. The confluence of information technology (IT) and the country's low-cost human resources made India an ideal destination for outsourcing in the entertainment industry, including animation.

N. Murali, Joint Managing Director of The Hindu, said the newspaper industry had, since the initiation of economic reforms, been freed from "indirect control" of governments exercised through canalisation of newsprint imports, allocation of newsprint and foreign exchange control. However, the newspapers' democratic role of a watchdog was being threatened by their excessive dependence on advertisements for their viability. Competition on the basis of the price of newspapers ("price wars") accentuated this dependence. Readers should be prepared to pay for quality, he said, pointing out that the price of newspapers in India was among the lowest in the world at a time when investment in new technology and equipment was rising.

Srinivasan K. Swamy (Chairman, R.K.Swamy BBDO), questioned the rationale of levy of both sales tax (under the category of works contracts) by the State Government and service tax by the Centre, on the advertising industry.

After the introduction of grant of input tax credit across service and excise taxes, many agencies were not liable to service tax at all but enormous paper work was involved in this process.

Anita Ratnam, media personality and choreographer, said very often 25 per cent of the grants from the Union Government's Department of Culture was not remitted in the second instalment to the beneficiary, even though receipts were initially issued for the whole grant. There was a disjunction between the practice of cash payment prevalent in the live performance sector (music concerts and film production) and the tax regulations.

T.N. Manoharan, tax consultant, said film producers should corporatise themselves and make use of loans from financial institutions.

P.K. Sridharan, Director-General of Income Tax (Investigation), advised entertainers to pay tax when it was due so that they could have peace of mind. Business losses could be carried forward and adjusted later.

Mahendra Parmar, president of the chamber, introduced the theme.

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