MUMBAI: Given that the radio industry is still at its infancy and has great employment and media opportunities in the semi-urban and rural markets, the FM operators are expecting a reduction in service tax in the forthcoming Budget 2008.

Since fringe benefit tax is a non-deductible expense, FM industry is looking for a concession in the qualifying rates to radio operators. They feel that would provide a competitive advantage and a boost to the radio Industry. Besides, they are looking for an eight-year tax holiday to FM radio operators.

Big FM COO Tarun Katial said, “Radio broadcasting should be removed from the ambit of service tax, just like print media. Print media is kept outside the ambit of service tax and the same benefit should be extended to radio as well, if we want to establish a level-playing field. If not, the local advantage extended by radio as a medium will diminish. Additionally, radio operators are required to pay licence fees on 4 per cent of gross revenues wherein, gross revenues include service tax, resulting in double taxation.”

The FM industry is stressing reduction of customs duty for import of equipment. This would particularly help FM stations lower their infrastructure costs and positively impact their margins especially in Tier II and III cities as the third phase of FM bidding is coming up.

Radio City CEO and AROI president Apurva Purohit said, “Last year in the budget, the government had reduced the customs duty for import of equipment for the radio industry from 40 to 20 per cent. Given the further expansion of FM stations post phase III later this year, one expects this to be further reduced.”

Likewise, the industry wants the government to look at reducing the excise duties on the items made domestically.

Radio broadcasters feel the current customs duty, countervailing duty (CVD), additional duties and educational cess are too high as the total import duties reach nearly 35 per cent. Nearly all of the capex of setting up studios and transmission infrastructure is incurred on imported items.

Radio Mirchi CEO Prashant Panday said, “Considering that radio projects in the future will come up in small towns (with population between 100000 and 500000), the government should look at totally removing additional duties and educational cess and significantly reducing the CVD on these items.”

Panday feels that the government must allow the loans given by banks to the radio sector (in B, C and D category towns as classified by the Ministry of I&B) to be classified as “priority sector lending." This will make it easier for potential broadcasters to access funds when setting up radio stations in these small towns.

The government must extend the backward areas benefits to radio stations launched in B, C and D category towns – giving all advantages to radio broadcasters, similar to what other industries enjoy.

Highlights of FM radio‘s Budget 2008 wishlist

• 8-year tax holiday to FM Radio operators. Radio Broadcasting should be removed from the ambit of service tax, just like print media.
   
• Fringe benefit tax is a non-deductible expense. If a concession in the qualifying rates is provided to radio operators, it would really provide a competitive advantage and a boost to the radio industry.
   
• The government must look at reducing the total burden of imported equipment. It is well known that nearly all of the capex of setting up studios and transmission infrastructure is incurred on imported items. The current customs duty, CVD, additional duties and educational cess are too high – total import duties reach nearly 35 per cent.
   
• Likewise, the government must look at reducing the excise duties on the items made domestically.
   
• The government must allow the loans given by banks to the radio sector (in B, C and D category towns as classified by the I&B ministry) to be classified as “priority sector lending.” This will make it easier for potential broadcasters to access funds when setting up radio stations in these small towns.
   
• The government must extend the backward areas benefits to radio stations launched in B, C and D category towns – giving all advantages to radio broadcasters that are given to other industries.