Ad billing sparks battle between media, broadcasters

For the last two days, broadcasters have said "no" to advertisements . And the battle, which sees advertising and media agencies pitted against broadcasters is about the way transactions are billed, and the tax payable on these transactions, reports CNBC-TV18's Pavni Mittal.

Advertising is a revenue source for a TV channel. But for the last two days, broadcasters have stopped airing these advertisements. This, after an income tax order sent six weeks ago, has resulted in a deadlock between advertisers and media agencies, and broadcasters. It's a decision that's costing the broadcast industry between Rs 30 and 40 crore a day.

Here's the problem. The taxman wants broadcasters to pay tax on the entire amount for which ad slots are sold, but broadcasters say they only get 85 percent of the gross bill amount from advertisers, while the balance 15 percent is discounted as commission paid to the ad agencies or media buyers. In the light of this tax notice, broadcasters want to change the billing system from gross billing to net billing, but ad agencies disagree.

Sanjay Gupta, COO, Star India says, "The main hurt is to us as broadcasters. As an industry we are losing all this daily. We are losing serious money."

"Given the fact that the tax authority has raised this issue, we want to undo the practice and now change it. The answer is not in postponing it. I think most of the time, the suggestions have been to postpone the problem, rather than address it."

The broadcast industry body, the Indian Broadcasting Foundation is negotiating with advertising's umbrella agency body the AAA of I. However, this body has pointed to a rift among broadcasters saying a few channels, like Set Max, have been playing advertisements.

But broadcasters say, in some special cases, this has been allowed. Gupta says, "Some channels were having some problem in uplinking because some channels get uplinked from Hong Kong and Singapore."

"IPL is one big activity, so I think that's material. I think it was in the benefit of the advertiser and broadcasters since it's such a meaningful activity, you cant stop it."

Only four advertisers - Ghadi, Nirma, VIP, and Future Group, have agreed to the change in demand. However, broadcasters are staring at a disputed tax liability of close to Rs 400 crore on this allegedly 15 percent undeclared income from 2009 onwards.

So, while any change to the billing system will close this loophole for the future, broadcasters will still have to appeal to the tax department for relief from what broadcasters are calling wrongly demanded back-taxes.

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