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Entertainment industry eyes duty cuts in Budget

The industry expects Budget to slash import duty and change taxation structure to help it emerge as a global hub for quality content production.
By Sumeet Chatterjee (IANS) | PTI, Mumbai
UPDATED ON FEB 23, 2005 12:20 AM IST

India's flourishing entertainment industry expects the upcoming Budget to slash import duty and change the taxation structure to help it emerge as a global hub for quality content production.

Industry representatives say the Government must give some preferential treatment in the annual fiscal package to the entertainment sector that has the potential of earning billions of dollars in foreign exchange.

Finance Minister P Chidambaram will present the Budget for the fiscal year 2005-06 to Parliament on February 28.

"The Indian entertainment sector has massive potential and it is likely to become one of the main catalysts for economic growth in the years ahead," said chief executive officer of Lall Entertainment, Bhuvan Lall.

Lall Entertainment is a privately held company with business interests and expertise in production and distribution of animation, broadcasting and cinema content globally.

"The Government must create an environment by offering some financial incentives so that the industry can realise its potential. We are expecting the budget to take a few steps in this direction," Lall told IANS.

According to Lall, the Budget must bring down the customs duties imposed on import of broadcasting and filming equipment from an average of between 25 per cent and 45 per cent to minimum possible levels.

"Also, the entertainment and service taxes imposed on the industry are not very rational and should be done away with immediately. The sector should be given at least five years of tax exemption to help it grow," he said.

"Currently, the high duty and tax barriers make our products very uncompetitive in the global market. We are at a very critical growth phase and we need government support to become one of the leading global players."

The Indian entertainment industry's revenue touched Rs 218 billion in the last calendar year and is likely to grow by 20 per cent over the next few years to touch Rs 595 billion by 2010, says management consultancy firm KPMG.

The film industry revenue is also likely to increase to Rs 143 billion by 2010, up from Rs 59 billion logged in the last calendar year.

Experts say the market for the Indian entertainment products, including television software, films, video games, animation and music, is huge in different parts of the globe.

President of the Film and Television Producers Guild of India Amit Khanna says the Budget for the next fiscal year should abolish the countervailing duty imposed on raw films imported into India.

He, however, doesn't expect the Government to unveil any kind of incentive on earnings through exports of entertainment products.

"At a time when the Government is gradually bringing export earnings in all sectors under the tax purview, it wouldn't be wise to expect a special treatment for the entertainment industry," said Khanna.

Of the estimated Rs 45 billion turnover of the Indian film industry logged in the last year, earnings through exports accounted for Rs 10 billion. The film export earnings are likely to rise rapidly over the next few years.

The entertainment industry representatives are also pitching for income tax concessions for setting up multiplexes in all cities.

Currently, companies setting up multiplexes in any part of the country are given 50 percent income tax rebate. This rule, however, doesn't apply in the case of the four metro cities -- Mumbai, New Delhi, Kolkata and Chennai.

"We are expecting income-tax exemption for multiplexes to be extended and made applicable to metro cities also," said chairman of Adlabs - the promoter of Imax chain of multiplexes - Manmohan Shetty.

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