As tax compliance goes up, someone has to take the hit: Jawahar Goel

Interview with Managing Director, Dish TV

Jawahar Goel is the man behind the throne at the Rs 6,350-crore Zee, one of India's largest media groups. His job is to implement whatever elder brother and Chairman Subhash Chandra dreams. Over the years, Goel has set up Essel World, Essel Propack, Siticable, Zee News and Dish TV, of which he is the managing director. Since digitisation was kicked off last year, Goel has been talking about how the pressure it puts on the wonky tax structure could stymie any potential benefits. As India goes through the penultimate round of digitising all of its 153 million TV homes, Vanita Kohli-Khandekar speaks to Goel on what ails the TV distribution business. Edited excerpts:

What is the issue with taxes?

When we started DTH (direct-to-home) in 2003, there was no entertainment tax on it, only service tax. Now, both cable and DTH pay service and entertainment tax, while multiplexes pay only entertainment tax. In all, taxes take away 35-40 per cent of the top line for DTH operators. MSOs (or cable companies) manage to make money because they do not pay a licence fee (like DTH) and they get carriage fees. But DTH suffers from double taxation.

 
What are the post-digitisation implications of a poor tax regime?

In Delhi, Rs 60 lakh is collected as entertainment tax from cable every month (at the rate of Rs 20 a subscriber, this indicates 300,000 cable homes, clearly showing the scale of under-declaration). Now, five million boxes have been installed (because of mandatory digitisation); so, logically, Rs 10 crore should be collected as entertainment tax. However, this figure stands at only Rs 2-3 crore. Assuming operational issues are sorted, it would rise to Rs 10 crore in the next three years. As tax compliance goes up, everyone - MSOs, TV distributors, last-mile cable operator (LCO) and linemen - is being squeezed.

Broadcasters get 60 per cent of their (pay) revenue from DTH and 40 per cent from cable. But that 40 per cent goes back to cable because of the carriage fee. If the broadcaster stops paying carriage fee (one of the by-products of 100 per cent digitisation) and there is 100 per cent tax compliance, it would hit either the industry or the consumer; (cable) rates will go up.

What is the industry planning?

For this, we need to educate the consumer and give him a consolidated bill which tells him clearly we get just a third of the money he pays. More than a third goes to taxes and the rest to content (broadcasters). Also, we have appointed one of the big five consulting firms to make a case (on the taxation bit) for us. We will present it to the finance ministry. If it doesn't work, we might have go on a token strike of, say, an hour a day.

How well do you think digitisation is working?

Everyone is learning. The MSO thought digitisation meant putting boxes. But it is much more than that - there is customer service, IT and a whole lot of other things involved. So, cable companies are now hiring chief technology officers, or CTOs, from DTH firms. We (Siticable) have actually connected our LCOs with a central server and software. He then does his own billing et al. He can even disconnect a subscriber directly, if payment hasn't happened.