Annexure V

Broadcasting service :

1. As per section 65(13), 1994, "broadcasting" has been defined to have the meaning assigned to it in clause (c) of section 2 of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990. As per this definition "broadcasting" means the dissemination of any form of communication like sign, signals, writing, pictures, images and sound of all kind by transmission of electro-magnetic waves through space or through cables intended to be received by the general public either directly or indirectly through the medium of relay stations and all is grammatical variations and cognate expressions shall be construed accordingly. The taxable service is any service provided to a client, by a broadcasting agency or organisation in relation to broadcasting, in any manner.

2. The service covers both radio broadcasting and television broadcasting. While radio broadcasting is done by the All India Radio or any private radio channel, television broadcasting is done by Doordarshan, Indian TV Channels and Foreign TV channels. The broadcasting may be of advertisements, serials/programmes or live events. The client is the person who wants an advertisement to be broadcast or the sponsor of a serial or programme or event who wants the serial or programme or event to be broadcast. The service provider, that is, broadcasting agency or organisation is the AIR, Doordarshan, other Indian TV Channels and foreign TV channels who broadcast the programme in India.

3. Broadcasting is done either terrestrially or through satellite links. Most of the private TV channels are using satellite links for broadcasting their programmes. The uplinking of the programme to the satellite is done through VSNL or other earth stations located in India or through other agencies located abroad. The up-linking agencies are not broadcasting agencies and are not liable to service tax in respect of such service. The signals beamed by satellite are received either by Multi System Operators (MSO) or directly by cable operators. In the latter case the cable operator further retransmits the signals to the public (viewers). However, in the case of MSO, they first retransmit signals to the cable operator who in turn retransmits the same to the viewers. The cable TV operator who merely retransmits the programme is not a broadcasting agency or organisation with respect to such retransmitted programmes. The MSO also is not a broadcasting agency to the extent he merely retransmits signals. However in case the MSO operates a local cable channel such as Spectranet, Siticable, Incable, Sumangali, etc. and broadcasts a programme or serial or advertisement on his own, he would be liable to pay service tax on the amount he charges for the service rendered to his clients in relation to broadcasting of such programmes. It may be noted that there may be instances when cableTV operators themselves undertake to broadcast advertisements. Cable television operators have, however, been exempted from the levy of service tax vide notification No. 8/2001-ST.

4. Broadcasting service is provided by selling time slots. In the case of advertisements, service charges are recovered based on the duration and frequency of advertisement and the time slot (prime time, non-prime time etc.) provided for the advertisement. In the case of serials/programmes/ events, service charges are made on the basis of factors such as duration, time slot, etc. However, some free commercial time is provided to the sponsor, which he can sell the same to others. In the case of broadcasting service, the advertisement charges or the sponsorship charges received by the braodcasting agency or organisation are the consideration for the services rendered and service tax is payable on these charges.

5. In case of foreign satellite TV channels, their head office may be located outside India. However, they have their branch offices or subsidiary companies located in India. In some cases, they have appointed agents. These branch offices/ subsidiary companies/agents act on behalf of these channels, selling time slots and recovering service charges and remitting the same to their head office/holding company/principals as the case may be. In such cases, these branch offices/subsidiary companies/ agents are rendering the service in relation to broadcasting and therefore, they are liable to pay the service tax and comply with all other procedural formalities relating to service tax.

6. In the case of AIR and Doordarshan, the billing for the service rendered is done by the Regional Stations of AIR or Regional Doordarshan Kendras. These Regional Offices will have to be, therefore, registered for payment of service tax and for complying with other procedural formalities.

7. A doubt has been raised whether Prasar Bharati (AIR and Doordarshan) is liable to pay service tax since under section 22 of the Prashar Bharati Act 1990, they are exempt from any income tax or any other tax in respect of any income, profit or gains, accruing or arising out of the Fund of the corporation or any amount received by them. In this regard, it is clarified that the said section 22 applies only in respect of taxes on income or profit or gains. The exemption is only in respect of direct tax and not in respect of indirect tax. As such the argument that AIR or Doordarshan are not liable to pay service tax is not correct.