How GST will usher in a new era of tax reforms for the OOH industry

The Indian economy is on the cusp of implementing GST, one of the biggest tax reforms that it has witnessed in decades. GST or Goods and Services Tax at its core aims at unifying the taxation system and evolving the nation as a singular market rather than a market fragmented across state borders. Although the GST bill has been in the pipeline for quite some time, the recent months have seen some progress both at the central government level and across various states.

Impact on the Indian Economy

GST is a prevalent taxation system in a number of countries across the globe and is levied on the goods and services that are purchased or utilized by the consumers.

In India, GST aims at subsuming the various levels and varieties of taxes and bringing them under one umbrella. Although an initial rise in the net percentage of taxes will be witnessed, the overall cost of goods and services is expected to decrease across all verticals of every industry.

less-taxing_511b50cb40d7e_w1500

 

Source

According to various renowned analytics, once GST is introduced in the Indian ecosystem, it will have a superb effect on the GDP of the nation.

Apart from catalyzing the GDP growth by around 2% the uniform tax structure will usher in a more transparent and corruption free taxation system across the nation.

Putting GST in perspective for OOH media providers

Post introduction of the GST bill, the nation has seen mixed responses across all industries. Since most details are still being chalked out, nobody’s quite sure about the exact impact of the reformed taxation system.

One industry that has experienced the most turmoil is media houses and OOH media service providers. Since most of OOH and media buying transactions are B2B, the overall cost can increase marginally. This does not mean that the advertising budget will go up, what it means is that media houses would need to organize their payment scheduling in a more efficient manner.

FEATURE_2

Source

Since most service providers in the OOH industry experience an irregular flow of cash, this could mean that service providers would need to shell out some more for the taxes being filed from their own pockets. In order to tackle this, a uniform payment system would need to be implemented.

Advantages

Less paperwork

Since the taxation system is being unified, there would be no longer a need for service providers to file multiple taxes. A simplified system would directly mean less paperwork and the media buying industry would experience a steady growth incremented by the overall growth of the economy.

Uniform taxation across states

One of the major hurdles that a media buying company or any OOH service provider experiences is to keep track of taxes levied across different states. The introduction of GST would simplify this to a great extent. A uniform tax percentage across states would be implemented and the federal nature of the system would simplify things further.

They would no longer need to worry about the taxes levied in different states while media planning for a nationwide campaign. This would directly enhance efficiency and in turn the efficacy of the campaign

Long term growth

GST has been designed to have a long-term impact on the economy. Since the economy would grow, OOH providers would grow with it. More influx of capital into the market would enhance the advertising budgets, directly increasing the revenue for media houses.

Since OOH services are a B2B transaction, the impact of GST would be nominal. The clients would mostly cover the costs and hence the service provider would need to restructure the way they pitch and bid for projects, to prevent adverse effects of media campaigns.

Disadvantages

GST is not all sunshine; there is an immediate hailstorm mostly for OOH service providers in smaller cities. Since most of the clients are local for such providers, the budgets are usually limited. The increase in taxes under GST would mean that the clients would need to shell out more. To counter that from affecting media buying and advertisement campaigns, the providers will have to work around on the bids.

Although this would be a short-term impact, business will definitely be affected.

The best way forward for B2B transactions and media houses is to unify their payment systems and ensure a regular influx of payments by streamlining business functions allowing them to grow as the economy grows.

GST is a welcome change for the Indian economy. It not only unifies the taxation system but also paves the way for a better economy in the long run. Directly affecting the way India does business with the world and boosting exports, GST is good news for the nation. The only chink in the armor being the implementation across the nation, GST will definitely have a massive impact across industries and services.