Ahead of Budget 2026, M&E industry flags GST, TDS, ITC roadblocks; seeks structural tax reforms

Ahead of the Union Budget 2026–27, the Indian Broadcasting and Digital Foundation (IBDF) and the Indian Digital Media Industry Foundation (IDMIF) have pitched for wide-ranging tax reforms across both direct and indirect taxes, warning that the current framework is increasing compliance costs, blocking working capital, and slowing growth in one of India’s fastest-expanding sectors—the media and entertainment (M&E) industry.

In a comprehensive pre-budget memorandum submitted to the finance ministry and the GST Council, the industry has sought rationalisation of GST rates, easing of input tax credit (ITC) restrictions, simplification of compliance procedures, and parity for media services under income-tax provisions.

Push for GST rate cut on TV and OTT subscriptions

One of the most significant demands is a reduction in GST on television and OTT subscriptions from 18% to 5%, arguing that digital and broadcast media today serve the same public-interest role as print, which enjoys tax exemptions or concessional rates.

“TV channels and OTT platforms are no longer discretionary luxury services. They are primary sources of news, education and entertainment for Indian households,” the memorandum notes, pointing out the inconsistency of taxing digital subscriptions at 18% while print media remains exempt.

The industry has also flagged that cinema tickets are taxed at concessional rates of 12% for lower ticket slabs, while monthly OTT subscriptions—providing content to entire households—attract the highest GST rate.

Warning on inverted duty structure

However, broadcasters have cautioned that any GST rate cut must be accompanied by reforms to avoid an inverted duty structure, as key inputs such as content acquisition, production services and sports rights continue to attract 18% GST.

To address this, the industry has proposed either:

Allowing refunds of accumulated ITC on input services, or

Reducing GST on core content-related inputs to 5% to align input and output tax rates.

Without such measures, companies fear chronic ITC accumulation and severe cash flow stress.

Relief sought from compliance-heavy GST provisions

The memorandum flags multiple operational challenges under GST, including:

B2C e-invoicing: Broadcasters have urged the government not to extend e-invoicing to high-volume, low-value B2C transactions, particularly for OTT platforms, citing negligible revenue gains but substantial compliance and IT infrastructure costs.

Input tax credit utilisation: Industry bodies have called for removal of restrictions under Section 49 of the CGST Act that have led to skewed accumulation of state GST credits.

SEZ supplies: Relaxation of endorsement requirements for services supplied to Special Economic Zones has been sought to ease refund delays and compliance friction.

Large Taxpayer Unit (LTU): Drawing from the income-tax regime, the industry has proposed a single, centralised GST audit mechanism for large multi-state entities to curb repetitive audits and litigation.

Working capital stress and export-related anomalies

The industry has also highlighted GST provisions that strain working capital, including:

Mandatory payment of GST on export services where remittances are delayed beyond one year, without refund of interest once payments are eventually received.

Inability to offset reverse charge liabilities using accumulated ITC, forcing cash outflows even where large credit balances exist.

These provisions, the memorandum argues, undermine the government’s export promotion objectives.

Direct tax reforms: parity for media sector

On the direct tax front, the industry has sought equal treatment for media and entertainment companies, particularly in restructuring and consolidation scenarios.

A key proposal is to extend carry-forward of losses under Section 72A of the Income-tax Act to broadcasting and media companies, a benefit currently available to sectors such as telecom, power and software.

“Given the capital-intensive nature of media businesses and ongoing consolidation, denial of loss set-off acts as a disincentive to restructuring,” the memorandum states.

Withholding tax, goodwill and litigation concerns

Other major direct tax recommendations include:

Aligning the definition of “royalty” for transponder hire charges with India’s tax treaties to reduce litigation and avoid denial of foreign tax credits.

Allowing depreciation on acquired goodwill, at least in cases of arm’s-length purchases, reversing the blanket disallowance introduced in recent years.

Streamlining processing of income-tax refunds and lower withholding tax certificates to prevent prolonged cash blockages.

Providing clarity on withholding tax provisions such as Section 194J and 194R, which have led to interpretational disputes and compliance uncertainty.

Call for policy stability and ease of doing business

Industry bodies have warned that persistent ambiguity in tax rules—across GST, withholding taxes and cross-border transactions—has resulted in frequent audits, overlapping notices and prolonged litigation, diverting resources away from growth and content creation.

“The objective of these recommendations is not revenue dilution, but rationalisation,” the memorandum states, adding that a predictable and growth-oriented tax framework would support India’s ambition to become a global content hub while strengthening the digital economy.

With Budget 2026 expected to place renewed emphasis on consumption, digital growth and ease of doing business, the media and entertainment industry is hoping that at least some of these long-pending tax reforms finally find a place in the finance minister’s speech.