Broadcasters, agencies settle dispute over client billings

A two-day impasse led to a revenue loss of Rs 60 crore for channels as ads stayed off air

TV stations ended a two-day blackout on accepting ads today after the Indian Broadcasting Federation (IBF) and the Advertising Agencies Association of India (AAAI) settled their dispute over client billing in a marathon meeting held here yesterday.  

The broadcasters had refused to air ads on May 1 after they got notices from the Income-Tax department for non-payment of tax deducted at source (TDS) on the 15 per cent agency commission shown on the bills presented to the media agencies by broadcasters.

The outcome of Thursday’s meeting was a victory of sorts for IBF as it was decided that AAAI would seek a circular from the Central Board of Direct Taxes (CBDT) clarifying that broadcasters were not required to deduct TDS from agency commission since it was never paid by them in the first place.

If CBDT did not issue the circular by May 31, then broadcasters could raise net bills from June 1, instead of the gross bills they issue now. Gross billing is the value of the bill, including the 15 per cent agency commission, while net billing is the value of the bill minus the commission.

Uday Shankar, chief executive officer (CEO) of Star India, Sudhanshu Vats, group CEO of Viacom 18 and Sunil Lulla, managing director and CEO of Times Television Network represented the IBF, while the AAAI was represented by its president Arvind Sharma and allied members such as Shashi Sinha, India CEO of IPG Mediabrands, C V L Srinivas, CEO of GroupM, South Asia, and Sundar Swamy, chairman of R K Swamy BBDO.

"This documentation was arrived at after speaking to a number of tax experts," said Sharma, who is also the chairman, India sub-continent, Leo Burnett. "The agreement was signed by me and Uday (Shankar) yesterday," he added.

While Shankar, Vats and Lulla were not immediately available for comments, Raj Nayak, a media veteran and CEO of Hindi general entertainment channel Colors, said: "This is a step in the right direction. The fact that everyone sat for so long, shows there was intent to solve the issue at hand. It’s a progressive step and a solution, which is mutually agreeable and in favour of all the parties.”

The impasse between broadcasters and agencies had resulted in a revenue loss of close to Rs 60 crore over two days for channels since many were not running ads from May 1.

COMPROMISE FORMULA

• AAAI will seek a circular from the CBDT clarifying that broadcasters like other media owners are not required to deduct TDS from agency commission.
• If CBDT does not issue the circular on time, broadcasters can raise net bills from June 1, which will mention both gross and net amounts in keeping with the interests of the two stakeholders involved