With myriad taxes and multifarious statutory compliances, the media and entertainment sector keenly hoped that Budget 2013 would lead to simplification of onerous tax laws and resolution of longstanding tax controversies impacting it.

However, very few of the Budget proposals are relevant to the sector. On the indirect tax front, Finance Minister P. Chidambaram conceded the film industry’s request to withdraw the service tax exemption granted last year for copyright in cinematographic films. This is expected to improve the finances of producers. However, the exemption continues for exhibition of cinematographic films in theatres. Another proposal impacting distributors of TV channels is the increase in customs duty on set-top boxes from 5 per cent to 10 per cent. A duty increase during the critical phase of the digitisation process may impact set-top box sales, and add to the financial burden of DTH and cable companies.

On the direct tax front, the domestic withholding tax rate for payment of royalty to non-residents has been increased from 10 per cent to 25 per cent. This could significantly impact payments for acquisition of content, transponder hire charges and so on, especially where the tax treaty benefit is not available.

TDS refund at digital speed

The Central Board of Direct Taxes recently notified procedural changes to streamline the TDS (tax deducted at source) process. A key amendment is the introduction of an electronic system for refund claim by deductors, who can now file form 26B electronically under digital signature to claim refund of TDS deposited. The form should include details such as name of the deductor, TAN (Tax Deduction and Collection Account Number), bank account details and particulars of refund claimed. The move is expected to speed up the refund process. Other amendments include furnishing quarterly TDS statements electronically under digital signatures, and revision of forms 16 and 16A for additional information.

— KPMG India

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