GST: a boon for the print industry?

The hottest topic these days is GST or Goods & Service Tax, which is a comprehensive, multi-stage, destination-based tax that will be levied on every value addition. Effective July 1, 2017, GST has created a furore – retail stores came up with pre-GST offers to clear the old stocks, more than six months old, to reduce their GST burden. While it was a shopping paradise for consumers, many businessmen like cloth merchants in Surat went on a strike to protest against the GST applicable on clothes.

Print has been on a tax holiday for long, but not anymore. A GST rate of 5% for print industry has been applied. The two tax implications on print are – selling of ad space in print has come under five per cent tax bracket and services by way of job work in relation to printing of newspaper has also been taxed at five per cent.

Pre-GST, taxes for print companies included a 3% on newsprint, while advertising and circulation were at zero taxation. But, print companies can set off the GST on advertising with newsprint, which will not have a significant effect.

But, there would be a few advertisers who cannot take a contra entry or set off. Thus, these advertisers might look for other options where he can promote his products/services without paying extra 5%. This might result in a decrease in revenue for the print media companies.

But there’s a silver lining too…GST can reduce the cost of advertisement and lead to an increase in spending by firms as traders are bound to get full credit of the tax charged on the ad. An Ernst & Young (EY) report of GST says that automotive, FMCG and consumer durables firms are also set to advertise more due to GST while e-commerce and banking and financial services companies, are set to see a negative impact. Also, petroleum companies are slated to see the biggest impact on ad spends due to GST while real estate, telecom and insurance are not expected to see any significant difference. Another important fact reported is that e-commerce, which is one of the top ad spenders over the last two years, will register a negative impact due to GST.

While, it is a wait and watch situation now, the verdict will be out soon.

Till then, happy printing!

Sonal Khurana
sonal@smediagroup.in