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MOSL: MEDIA | GST rates-No spanner in the works for Media-Rates in line with expectations across the value chain

​MEDIA | GST rates: No spanner in the works for Media; Rates in line with expectations across the value chain

The GST Council last week fixed tax rates that will apply to various goods and services under the new tax regime, which is expected to take effect from July this year. In our view, the announced GST rates were in line with expectations for the media sector – largely neutral for pay TV/radio broadcasters and print companies, and positive for distribution platforms.

-Pay TV and radio broadcasters: The GST rate for pay TV and radio broadcasting services has been fixed at 18%, higher than 15% service tax under the existing regime and in line with expectations. However, we do not expect any meaningful impact on revenues, as (1) pay TV is a mass advertising medium with significant pricing power and (2) radio broadcasters are increasingly gaining significance in the media budgets of both national and local advertisers.

-Input credits to balance tax inflow-outflow equation in print: In the existing regime, print ad/circulation revenues (output) and newsprint costs (input) are kept outside the indirect tax net. However, post the implementation of GST, print ad revenues (two thirds of industry revenue) will be taxed at 5% with circulation income remaining tax-free. Pure newsprint costs, which typically account for ~27-28% of revenue, too will be taxed at 5%. The key here is utilization of input credits (which until now were not provided to newspaper companies as their revenue was tax-free), which could largely offset the tax outgo on print ads.