Broadcasters, advertisers slug it out

MUMBAI: The Star TV network will block advertisements of all companies that refuse to pay the 5 per cent service tax which has been in force since July last year.
The Murdoch-owned network has already pulled out Hindustan Lever Ltd’s ads on Sunday night for non-payment, along with Sony Entertainment Television.
‘‘I’m not going to cut my nose to spite my face.Not airing ads will cost a lot of money. But, advertisers have to pay up the service tax in accordance with the Indian Broadcasting Foundation directive. We pulled out HLL’s ads first as we had to start somewhere. If need be, we will have to pull out ads of all other clients who don’t pay,’’ says Star TV’s CEO Peter Mukherjea.
It is understood that HLL has the highest aggregrate ad spend across all channels. The other companies who have refused to pay the service tax include the Tata group, Coke, Pepsi, Colgate, P&G, Nestle, Britannia, ICICI, Hero Honda, the Godrej group, Raymonds, Johnson & Johnson and Marico, according to the India Society of Advertisers (ISA).
The tussle between advertisers and broadcasters on payment of service tax is more than a year old. The broadcasters have been under pressure from the government (which even served notices last year) to pay up.
The Indian Broadcasters Foundation has just issued a directive saying that advertisers will have to cough up the 5 per cent tax on the gross amount paid for TV spots.
The advertisers, on their part, feel that service tax should be a part of the contracted rate and not over and above it. Further, the advertisers will pay if the contract stipulates so.
The ISA, which represents a large chunk of advertisers says, ‘‘The law is clear. The liability to pay is that of the assessee, in this case, the broadcaster. The law does not provide for collection and then payment. The liability on the broadcaster arises irrespective of collection.’’
It has advised its members that it is not mandatory for advertisers to bear the broadcasting service tax.
However, ISA has recommended to all members that it would be in order for them to accept bills from broadcasters, which indicate service tax separately, as long as the total rate charged is not higher than the contracted rate.
Meanwhile, a HLL media statement said that along with other members it will follow the recommendations of the ISA on the matter.