IMI seeks change in classification of CDs, cassettes

Piracy is a big threat to the industry

The Indian music industry, which has already been hit hard by the wide-spread music piracy, has alleged that the Centre's decision to classify pre-recorded audio cassettes and compact discs (CDs) under electrical and electronic machinery has further worsened the situation.

While the industry currently pays an average sales tax of 10 per cent, "Chapter 85 of the Exim Policy has classified the pre-recorded cassettes and CDs under the electrical and electronics machinery segment. The music industry is now concerned over the sales tax implications of this development. In a realistic sense, the piracy menace, coupled with the new tax implications, will mean that the music industry in the country will be put to further hardships," said V J Lazarus, president of the Indian Music Industry (IMI).

IMI office bearers have already met officials of the Central VAT Committee and have expressed their concerns.

Revenues of the organised music industry in the country have fallen from around Rs 1,200 crore three years ago, to around Rs 700 to Rs 800 crore last year. Lazarus said that with the new tax implications, revenues of the industry are likely to fall further to around Rs 300 crore.

He said that the industry has asked the Union government to move pre-recorded audio cassettes and CDs from the electronics and electrical machinery category to the publishing category.

"Under the VAT regime, sales of audio cassettes and CDs will attract a tax of between 17 per cent and 22 per cent, which will be almost impossible to bear," he said.

The IMI is a consortium of over 50 music companies, including several prominent regional and national labels like Saregama, Universal Music, Tips, Venus, BMG Cresendo, Sangeetha, Sony Music, Virgin, Milestone, which represent over 75 per cent of the output in legitimate recordings.

IMI has been working to protect the rights of phonogram producers and in the process, promoting development of the music culture.

IMI began its anti piracy move in 1996-97, when audio cassettes were primarily pirated as compact discs had just 1 per cent penetration into the music market. However, with the passage of time, CDs, and subsequently, VCDs, DVDs and MP3 formats too began to be pirated.

Music piracy has been among the major contributing factors that have caused the income of the Indian music industry to fall substantially from Rs 1200 crore two years ago, to around Rs 700 to 800 crore last year.