DTH operators face tax pressures

More States to bring the service under entertainment tax net.

Home entertainment may soon cost more, if the current trend amongst State governments to levy the entertainment tax on DTH catches on. The Uttar Pradesh Government recently levied an entertainment tax of 30 per cent on DTH services and set top boxes, forcing Dish TV to stop further sales in the State. The CEO and Managing Director of Tata Sky, Mr Vikram Kaushik, told Business Line that Madhya Pradesh, Uttarakhand and others may soon follow suit. “If this happens, we will be left with no option but to pass on the additional burden to the consumer.” DTH operators are already taxed on the set-top boxes they provide and the services they provide by the Union Government. With State governments moving towards bringing DTH services and set top boxes under the entertainment tax net, operators are hard pressed to absorb the increasing tax burdens.

Mr Kaushik says, “The Government feels that the DTH industry has a lot of money and caters to the rich. However, this is not the case. DTH industry has been losing money and rural penetration is almost the same as that in urban areas.” According to industry analysts, the DTH industry has lost close to Rs 5,000 crore in 2008-09. Also half of Tata Sky’s volumes come from areas outside the 50 major cities. “With an average revenue per user of Rs 150 a month, the bulk of revenues goes into taxes,” says Mr Kaushik. Adding service tax, licence fee, excise duty, VAT and entertainment tax, the tax element per user for DTH companies goes up to almost 56 per cent. The entertainment tax itself varies from 15 per cent to 45 per cent across the country.

- Business Line