IOAA and outdoor industry members meet to discuss new Service Tax rules

Outdoor industry movers and shakers discussed action plans and also brought on-board KPMG to guide them forward with the new Service Tax rules.

In a recent development, most of the large outdoor advertising media owners and advertising agencies came together at a meeting last week under the auspices of the Indian Outdoor Advertising Association (IOAA) to find a way to follow the new service tax rules announced in the last budget.

Indrajit Sen, vice-chairman, IOAA and CEO, Laqshya Media, highlighted the importance of coming together and taking a collective decision for the betterment of the industry. "The Service Tax issue," Sen forewarned, "is a prelude to the Goods and Services Tax, and there is little the industry can do to change it," adding further that the reason for meeting is to see how comfortably they can live with it and grow together.

IOAA has appointed business advisory KPMG, to study the change, explain the challenges, and to suggest a plan of action. KPMG's executive director Santosh Dalvi decoded the changes and how it impacts the industry, both financially and procedurally.

It was made clear that unless immediate steps are taken to create a formal structure for conducting transactions like billing within 14 days of completing service, paying agencies and media owners within 90 days, and the new provisions of Service Tax accruing at point of service delivery, these are going to severely affect the working capital of both agencies and media owners in the industry.

It may be noted that unlike other media like print, television and radio, the Indian outdoor advertising industry -- currently pegged at an estimated annual revenue of about Rs 1,600-1,800 crore -- has so far been quite unstructured, with no standard norms for initiating or ending transactions, including no payment norms or standard practices. One-to-one negotiations are the order of the day here.

This has led to a general stagnation in this medium, both in terms of investments in modernising the medium and also revenues generated by it from advertisers. But, globally, outdoor media advertising has come a long way as a major source for Public-Private partnership (PPP) investments for urban development and city modernisation projects in all advanced economies.

At the meeting, Noomi Mehta, chairman, IOAA and chairman and managing director, Selvel One Group, also presented recommendations towards creating and strictly implementing a standard operating procedure (SOP) common to the industry, which include prescribing a minimum contract period, execution of contract, and release orders prior to starting a campaign. He also proposed a strict 60-day credit period, steps to provide proof of display in a practical manner, involvement of independent monitoring agencies, accreditation process of new agencies, a time frame for raising invoices and also issue of credit notes, amongst other things.

Industry veteran Sam Balsara, chairman and managing director, Madison World, also addressed the gathering and shared his perspective on the issue, bringing in experience and dimensions from other media like print and television. He also suggested the involvement of the Advertising Agencies Association of India (AAAI).

Sen wrapped up the session by proposing names of an action group with fitting representation from media owners and agencies. The group agreed to get things going, to start with, form a detailed standard operating procedure (SOP) for the industry with a self-imposed deadline of 15 days to be proactive and not reactive with external changes waiting to happen.