5% service tax takes newspapers by surprise

Levying a five per cent service tax on space selling in print and on jobs related to publication of newspapers, the goods & services tax (GST) has taken the sector by surprise.

The move, say print media sources, will increase pressure on the sector to raise the cover price of newspapers.

The Indian Newspaper Society (INS), the apex body for this segment, had lobbied against service tax, seeking to be kept in the exempt list, sources said.

The body is studying the impact of the move on the newspaper business, they added. The INS could not be immediately reached for comments.

Girish Menon, director and head, media & entertainment, KPMG India, said while the five per cent service tax on jobs related to publication of newspapers will allow media houses to set off input tax credit against it, the bigger worry was the service tax on space selling in print.

“A print publication, whether magazine or newspaper, will now have to invoice the client, stating not only the cost of the ad but also service tax. At a time, when digital advertising has been growing in India, service tax will raise the value of the bill acting as a dampener for clients or advertisers,” he said.

While the average number of print copies circulated in India a day grew to 62.8 million in 2016, according to the Audit Bureau of Circulation, which is a compounded annual growth rate of 4.87 per cent over a decade, digital advertising has also grown rapidly in the past few years, emerging as the third-largest ad medium in the country after television and print, according to media agencies GroupM and Madison.

Both Madison and GroupM have pegged the size of the digital advertising market in India by ~9,100-9,500 crore for 2017, which they say will grow between 30 and 40 per cent over the previous year.