The Indian media and entertainment sector is yet another integral part of our economy. Due to its rapid paced growth along with an ever increasing demand and bright future prospects, it is even referred to as the sunrise sector of the economy. The implementation of GST is likely to have both advantages as well disadvantages for the sector and its verticals like broadcasting, print, television and digital.
The major benefit that GST will accrue is that the entertainment tax which today varies from 20-67% on film tickets, cable operators and DTH will all get subsumed under GST. Moreover, any local body tax or state level tax levied will now be available as a credit, reducing the overall cost of production and sales. These costs will now be available for set off/compensation in the output.
Another advantage of GST will be the elimination of dual tax levies of service tax and VAT on various transactions that occur.
However, post GST implementation, the introduction of local body entertainment tax will be of great disadvantage as then, every local body will be able to levy tax. As a consequence, media companies will then have to pay additional local body taxes apart from GST.
Post-GST implementation, the companies are likely to observe a rise in compliance costs too due to filing of multiple tax returns across all the states they operate in. Presently, even if a company has offices in different states, they can do away with registration in just one location and filing of combined returns but now, each of the location will have to be registered which would mean filing of multiple returns from each of the location.
Another big challenge for the media companies under GST will be to account for the advertising revenues generated. The effect will be observed across print, television and digital media.
Based on whether print will be taxed or not under GST, whether the television or digital media will be taxed in each state or not; the flow of credit will depend and on it will depend compliance and claim of credit.