Tax relief and GST cuts top media sector's Budget 2024 wish list

As the media and entertainment industry revives itself, the different sectors have some key expectations from the budget.

Finance Minister Nirmala Sitharaman will present the full budget for the fiscal year 2024-25 of the Narendra Modi 3.0 government on July 23. The media and entertainment sector, like most other sectors, eagerly awaits her budget speech, hoping it will offer much-needed relief from its challenges.

Traditionally, the growth rate in the media and entertainment sector has outperformed that of India’s GDP. However, in 2023, when nominal GDP growth slowed to 9% in FY2024, M&E correspondingly grew much slower at 8%. Headwinds from geopolitics, the uncertainty of war, a scarcity of funding, and regulatory implications impacted advertising spends and reduced consumption.

As the industry revives itself, the different sectors have some key expectations from the budget.

Digital news publishers

Digital news publishers are hoping that the government will create a level playing field in the media sector. 

Abhinandan Sekhri, general secretary, DIGIPUB, the association for web publishers, says the GST on digital media subscriptions should be waived as news serves the public good.

“The current goods and services tax (GST) imposed on digital media is unfair compared to what print media pays. There is no justification for us to pay such high GST rates. For digital media subscriptions, the GST is 18%, while print media does not pay this rate on subscriptions. Instead, print media only pays GST on advertisements, and even then, the rate is a fraction of what digital media pays. This is fundamentally unfair,” he says.

“In 2018, the government indicated that they would bring digital media under Foreign Direct Investment (FDI) control to ensure a level playing field, as there is an FDI cap on print and broadcast media. The same logic should apply to GST, but it has not been implemented.”

According to the EY FICCI report, in 2023, there were 45.6 crore digital news consumers in India, of which over 80% consumed news on their mobile phones. However, monetisation remained a challenge, with news generating just Rs 1,900 crore in ad revenue and around Rs 200 crore in subscriptions primarily driven by premium and exclusive content. Just 17 lakh paid subscriptions were sold in 2023. It expects news and related products to generate subscription revenues of Rs 390 crore by 2026.

Sekhri, who is also the co-founder of the digital website Newslaundry, says the regulations have made what was once an attractive investment destination for media capital very unattractive. Many investors, after seeing the regulatory landscape, have exited the market.  

“The regulatory framework has become increasingly burdensome. For example, advertisers must now fill out forms and upload self-declaration certificates to the government website. This is just one of many compliance requirements that have emerged. The media sector had the potential to be the fastest-growing employment creator, but it has been stifled by these policy interventions. Addressing these issues at a macro level could revitalise the industry and restore its attractiveness to investors,” he adds.

Print

The Indian Newspaper Society (INS) has called on the government to eliminate the five percent customs duty on newsprint. Newsprint forms at least 65% of the production cost. Around 50% of the domestic demand for newsprint is met through imports. 

The society’s president Rakesh Sharma met the Finance Minister in June seeking its removal to ease the industry from the financial burden.  “If the import duty is rolled back, it will be a great relief for the industry,” he shares.

He also discussed with the Finance Minister the withdrawal of GST on e-newspapers, which are currently subject to an 18% GST. “When there is no GST on the physical paper, why should it be applicable to the e-paper?,” he asks.

Further, there is also a 20% custom duty on high speed machinery and other equipment. “These are required for news production and we hope the duty will be waived,” he adds.

The Association of Indian Magazines (AIM) has also made a similar representation to the government. Apart from waiving the customs duty, it has also asked that the GST for all paper be equalised.

Anant Nath, president, AIM, says the government has imposed the customs duty as it wants to urge publishers to buy domestically produced paper. But India doesn't produce enough to meet the industry's demand, and local mills do not produce lightweight coated (LWC) paper and glazed newsprint (GNP) at all.

“For the last four or five years, we have consistently advocated for removing the customs duty on paper. Initially set at 0%, the duty was raised to 10% before being reduced to 5%. We have urged the ministry to revert it to 0%, especially for magazines, as the specific types of paper we use, LWC and GNP, are not manufactured in India. Therefore, we have emphasised that reducing the customs duty to 0% is crucial to avoid making publishing prohibitively expensive,” he says.

Additionally, there is a 12% GST on LWC and GNP, compared to 5% on standard newsprint. “We have requested the government to equalise the GST on LWC and GNP to 5%, as there is no justification for the higher rate,” says Nath, who is also the executive publisher of Delhi Press.

A 5% reduction in customs duties would directly lower production costs, as it would decrease input costs by 5%. Nath says that given that paper constitutes about 20% of total costs, this could lead to nearly a 1% reduction in overall expenses, which is significant. 

“GST adjustments are more complex for publishers due to input credits, but it’s likely that some publishers could see a reduction of about 1 to 1.5% in their costs. Even a couple of percentage points can have a substantial impact on the overall cost structure,” he explains.

As per the EY FICCI Media and Entertainment report 2024, print media grew by 4% in 2023, earning a revenue of Rs 26,000 crore, with newspapers bringing in Rs 25,300 crore and magazines bringing in Rs 700 crore. The report notes that “soft newsprint prices will help news companies improve margins, which can enable them to re-invest in growing circulation through schemes and bundling.”

Radio

According to the EY FICCI report, radio segment revenues grew 10% in 2023 to Rs 2,300 crore, but it is still just 73% of 2019 revenues. It forecasts a compound annual growth rate of 7-9%, reaching Rs 2,700 crore by 2026.

Ashit Kukian, CEO, Radio City, says the radio sector looks to the upcoming budget to champion policies that support innovation, infrastructure development, and talent enhancement.

"As we approach the Union Budget 2024, the global radio market is well-positioned for substantial growth, driven by technological advancements and evolving consumer behaviours. However, challenges persist, particularly in advertising effectiveness compared to digital alternatives and geographical constraints. Overcoming these hurdles requires strategic investments in infrastructure and digital integration, empowering radio to compete effectively in the digital age and broaden its reach,” he says.

AI stands at the forefront of this transformation, offering opportunities to personalise content, analyse listener preferences, and optimise advertising effectiveness. By leveraging AI-driven platforms, radio can enhance content relevance, streamline operations, and deliver targeted advertising campaigns that rival those of digital competitors.

“We urge policymakers to prioritise these initiatives, ensuring a conducive environment for the radio industry's growth and endurance. By supporting innovation and digital readiness, we can lead the radio industry towards a future where technological integration amplifies its societal impact and audience reach,” he adds.

Overall M&E sector

Hiren Gada, WTD & CEO, Shemaroo Entertainment, says the growth of the media and entertainment industry relies on consumers' ability to spend on leisure and entertainment. 

“To increase disposable income, focusing on boosting employment through nationwide programmes and reducing the tax burden to enhance discretionary spending are essential. Additionally, incentives for emerging industries, favourable tax policies, and support for tech and R&D can sustain a healthy start-up ecosystem,” he says.

Gada anticipates a budget that not only sustains the industry’s growth but propels it towards new horizons. “The allocation of funds and providing financial incentives to stimulate research and development in technology, especially artificial intelligence, for the media and entertainment sector will be beneficial. This could include grants, tax credits, and subsidies for businesses engaged in innovative tech solutions.”

(With additional inputs from Shubhankar Sen.)