Budget 2011: Media The media sector has emerged as one of the fastest growing sectors of India. The Indian Print and Media industry offers attractive growth potential on account of mass urbanization and an increase in disposable income has brought a multifold increase in the potential customers. This along with the structural changes in the industry like a rapid adoption of satellite based television services via DTH and digital cable, and the improving spending trend of the urban and rural Indians augurs well for the growth of the sector in the coming years. For the Print industry, regional print has remained strong on back of increasing regional demand .However, rising newsprint prices could play a spoiler going forward. FY11 so far has been marked by consolidation and increase in deals and investments in the media industry. The trends that will define the industry in FY12 year will hinge a lot on budget policies for the sector. Here is a summary of the key expectations from the forthcoming budget for the media industry.

Budget Expectations

	The sector is overburdened with multiple tax duties along with different tax treatments for companies falling under different sub segments. It is expected that the tax duties for the sector will be simplified and rationalized.
	As the dynamics are changing in the media industry, a lot of program content is taken from foreign players. As per the current policy, in most of such contracts, if the recipient of income doesn’t have a Permanent Account Number, the withholding taxes at 20% are borne by payer (Indian companies). We expect that this rate will be relaxed so that Indian players don’t get penalized for payee’s failure to apply for PAN.
	The Indian advertising industry expects the withholding tax rate on advertising contracts to be rolled back as it already operates on thin margins and high taxes subject it to aggravated cash flow issues.
	In 2010-11 Budget, the digital headend equipment by Multi system operators was granted a project import status at a concessional rate of five per cent with full exemption from special additional duty. However, this has not helped industry since the basic customs duty for imported digital headend equipment still varies from 7.5 per cent to 10 per cent. The Government is expected to bring it down to zero percent to boost digitization in the country. For the same cause, the Government is expected to exempt Set top boxes from various duties for three years.
	Considering the tremendous growth potential in the country, there is also a demand for tax concessions to animation, gaming and VFX industry.
	For the print sector, duty exemption is expected in standard and glazed newsprint Light Weight Coated (LWC) paper that serves as a key raw material for magazines and accounts for 60% of the production costs. The Government is also expected to exempt the cover paper used by magazines from custom duty.

Budget Measures

	Countervailing duty (CVD) and excise duty exemption on jumbo rolls of 400 feet and 1000 feet colour, unexposed cinematographic film.
	Excise duty on LED is reduced to 5% and the special CVD is fully exempted.
	Excise duty reduced from 10% to 5% on parts of ink-jet and laser-jet printers.
	Minimum Alternate Tax (MAT) on book profits has been marginally increased from 18% to 18.5%.
	Surcharge on domestic companies reduced to 5% from 7.5%.

Budget Impact

	The CVD exemption on cinematographic film will be helpful for the Indian film industry which imports this film.
	The change in taxes on LED is not likely to affect the end consumers much.
	Reduced prices of printers will bring down the cost of production for the companies in print media.
	Increase in MAT is very nominal and is offset by a reduction in surcharge.

Company Impact

	Production houses like Balaji Telefilms will benefit out of the announcement of duty exemption on cinematographic film.
	Reduction in the price of printers is a positive for companies like Jagran Prakashan and HT Media.
Budget Impact: Media Sector Analysis for 2010  Latest: Performance Of Media Stocks | Media Sector Report

Complete coverage – Budget 2011