All 'play' and less 'duty' makes Budget fun for media

If the rows of international games and music titles at the local store become cheaper, remember to thank Finance Minister Pranab Mukherjee.

The rationalising of Customs duty on content imported for distribution in domestic markets will, according to media and entertainment companies, help them save an estimated 20 per cent — a benefit that will be passed on to customer. Vishal Gondal, CEO of Indiagames, points out that there could be a decrease of Rs 250-Rs 300 in costs of imported films, music and game DVDs, as well as CDs. This will check piracy.

“A drop in prices will help nurture the use of original content. Still, the gaming industry would also have liked a reduction in Customs duties on gaming consoles and hardware.”

The cinematographic films that are used in digital masters of films, music and game content, for duplication or further distribution, will now attract Customs duty only on the value of the carrier medium. For instance, if a movie DVD or a game CD is priced at Rs 1,000, it will now attract Customs duty only on the cost of the DVD (approximately Rs 35-40). Earlier, when entertainment companies purchased international content, they were required to pay Customs duty both as licensees and on the carrier medium.

Nitish Mittersain, CEO, Nazara Technologies, expects the move to facilitate the distribution of games from global gaming companies, such as Electronic Arts, in the Indian market. “This will lead to a higher number of global offerings and a possible pick-up in demand,” he says. Alok Kejriwal, CEO and co-founder, Games2win, agrees: “The real value in IP (intellectual property) is not in physical assets that carry the content, but the creative software inside, and hence taxing only the value that gets transferred is logical.”

Channels like UTV World Movies and UTV Action have said they would directly benefit from the restructured Customs duty on imported film content. “In the past, the Customs authorities had made duty applicable on carrier value and licence fee. Now we can expect to save 15-20 per cent,” said MK Anand, CEO, UTV Broadcasting.

However, IP rights for foreign films were subject to 4 per cent value-added tax earlier and the move to bring it in the service tax (10 per cent) net isn't all good news, warns Timmy Kandhari, leader (entertainment and media), PwC India.