Yellow pages publishers too feel the heat

Publishers of yellow pages (directory) are feeling the blues as a blanket service tax has been levied on space sale for advertising in business directories and trade catalogues.

According to the Union Budget, the scope of specified taxable services is being amended to include sale of space in business directories, yellow pages and trade catalogues which are primarily meant for commercial purposes under sale of space or time for advertisement service.

Jayaraman Shashidhar, CFO, Infomedia India (previously a Tata group company), said, "This will definitely impact business in the short term." The company is the largest publisher in the yellow pages domain. Consultants such as Farokh Balsara, industry leader, media and entertainment at Ernst & Young, explains the current introduction brings clarity.

"Earlier there was a lack of clarity on whether advertising in yellow pages, inserts, classifieds and so on were exempt from service tax or not. The finance minister has specified that all advertising meant for commercial use will come under the 12.36 per cent service tax bracket," said Balsara.

Sandeep Khosla, CEO, Express Business Publications Division (BPD) and VP, Indian Express Group, which publishes business directories as well as several prominent trade publications said, "Yellow pages and trade publication advertising are used as a targeted vehicle for small scale businessmen. It's quite unfair to levy tax on them."

He further adds that the company will have to evaluate the viability of the business in future, as they are already running on slim margins.

Khosla feels that while the bigger advertisers such as LG and Samsung can bear the brunt of taxation, small scale businesses should have been spared. Balsara, however, feels that the taxation was justified as businesses in general are doing well.