NEW DELHI: Television commercials have been taken off the air following a dispute between Indian broadcasters and advertising agencies over billing methods that could be costing the former Rs 20 crore a day.
The clash centres around a switch from a gross to a net billing method, following a ruling by the government's income tax department. It specified that a trade discount given by broadcasters was actually an agency commission and should be taxed as such.
Consequently, the Indian Broadcasting Foundation has begun issuing net bills from the start of May, but the Advertising Agencies Association of India has opposed the move, saying it could nullify their commissions.
Broadcasters are carrying ads for those agencies that have agreed to move onto the net billing method, but an anonymous media planner said that between 60% and 70%
of ads were not coming on air.
Times Now, an English-language news channel, is one of those that is running ads from agencies that have agreed to net billing. Chief executive Sunil Lulla said it was up to the ad agencies to clarify the situation with tax authorities.
"It is a huge loss for broadcasters on a daily basis," Uday Shankar, chief executive of Star India, told The Times of India
"It is particularly hard for the free-to-air channels that are dependent on advertisements as a source of revenue," he added, "but we can't do business that exposes us to a tax default."
Despite the losses, he insisted that "the blackout will continue till agencies agree to a new billing approach".
Data sourced from The Times of India, The Hindu; additional content by Warc staff