Budget 2012: Cable sector needs to be given 'Infrastructure' status, says FICCI.

 FICCI in its pre-budget memorandum has given the following recommendations for services provided by TV and Radio broadcaster:

Digitization with addressability - There is a need to provide fillip to the importation and indigenous manufacture of set top boxes; towards this end import and excise duties on set top boxes should be subjected to a moratorium for three years coinciding with the sun set date for analog transmission as laid down by the TRAI in its latest recommendations on digitization. The service tax applicable to the DTH industry should be reduced by 4 percent for three years in order for it to sustain amid the multiple taxation regime afflicting the sector as some States have levied entertainment taxes on such services as well.

Infrastructure Status to the Cable sector: The Cable sector needs to be given "Infrastructure" status, in order to garner domestic funding. The Cable industry that has grown for the last twenty years in an unorganized manner has been catering to 90 million households by deploying out dated analog technology.

This has resulted in considerable loss to the government as tax collections have suffered owing to large scale under declaration of subscriber base by the cable sector. This lack of transparency has resulted in banks and financial institutions steering clear from the cable sector, thereby impairing quality of service, technological up-gradation and the required switchover to digitization with addressability.

TRAI has conservatively estimated that a sum of INR 50000 Crores is required to ensure the transition from analog to digital technology in the cable sector. Granting of infrastructure status to the broadcast infrastructure providers namely teleport operators, multi system operators, local cable operators, DTH operators, et al, shall go a long way to ensure well rounded growth of the sector.

Rationalization of FDI in broadcasting sector: The FDI limits for News and Current Affairs need to be raised to at least 49 percent as per the sectoral regulator - TRAI's recommendations of 2008. It is also imperative to align the foreign investment caps in broadcasting carriage with that of Telecom, in keeping with a technology agnostic approach so that the industry can achieve its full potential. Also it is a settled economic position that FDI is a far more superior purveyor of funding compared to other means of foreign investments given its inbuilt long term commitment.

Levy of both Service tax and VAT on "Copyright services": The Finance Act 2010 has introduced a new Service Tax category i.e. Cinematographic / Copyrights services whereby under the taxing entry for copyright services , temporary transfer of or permitting use of / enjoyment of copyright has been made liable for Service Tax. Effectively it appears that all form of exploitation of copyright by the rights - holder, will attract the levy of Service Tax.

State governments have already classified "copyright" as goods; hence transfer of copyright is already liable for payment of VAT / CST. Now, with the introduction of this service tax category, the same transaction attracts both levies i.e. Service Tax and VAT, leading to double taxation, causing great hardship to the industry. So, there should be a mechanism to avoid this double taxation.

Wealth tax on vacant land: Section 2ea of Wealth Tax Act defines the type of assets which are liable for payment of wealth tax, which among other assets, includes "urban land" as well. The section further excludes any unused land held by the assesses for industrial purpose for a period of two years from the date of acquisition. Considering the changing face of service industry on account of size and infrastructure requirements, the exemption benefit of initial two years should be allowed to land held for all business purposes instead of limiting the exemption to industrial purposes only.

Serve from India Scheme (SFIS ): In order to accelerate growth in export of services, Government of India has allowed an incentive in the form of SFIS to service exporters. Presently, SFIS credit can be utilized by the recipient or its group company in India with in a period of 2 years, against custom duty payable on imports of capital goods / consumables. Through a circular Government of India has extended the benefit of SFIS to excise duty payable for procurement of capital goods / consumables as well. We suggest:

- The utilization of SFIS scrip should be allowed to procure services as well. Further, such utilization may be treated as payment of Service tax and hence be eligible for CENVAT credit.

- SFIS scrip should be made transferable to companies outside the group companies as well. This treatment would be in line with similar benefit available to manufacturing / trading industry in the form of DEPB.

- The time limit for utilization of SFIS scrip should be increased from 2 to 5 years.

- Further, the definition of the term "Group Company" needs to be enlarged / clarified. Currently, field level officers are not allowing the benefit in case two companies are connected through an entity registered outside India.

Service tax liability on reverse charge basis: Presently, in case of import of any service which is otherwise chargeable to Service Tax, the recipient of service is liable to discharge Service Tax liability on reverse charge basis.

Further, Rule 5 of Taxation of Services (provided from outside India and received in India) Rules 2006 states that the taxable service provided from outside India and received in India shall not be treated as output services for the purpose of availing credit of duty of excise paid on any input or service tax paid on any input service under CENVAT credit.

In other words, when the service is rendered from outside India and received in India then such taxable service shall be treated as if the service receiver had himself provided the service in India and therefore tax is paid by the recipient of service in India under reverse charge. The above Rule prescribes that for the payment of tax under reverse charge, service recipient can't take input credit and hence is liable to pay in cash. This anomaly is causing operational / cash flow difficulty to the industry.

The above Rule should be amended to allow utilization of CENVAT credit to discharge liability under reverse charge mechanism.

Source : timesofindia.indiatimes.com