Are the new T&C of the Service Tax not an issue for the PR Industry

Hi,

I want to check something with the forum members.

I am sure all of you are aware of the rules that have changed in the
service taxes for the service industry. (For those of you who don’t
know about the issue please read :

Link :
http://www.audiencematters.com/columns-innerpage.php?title=29 ) ;

I want to know from the forum members how they are dealing with this
issue as the payment for most (99.9%) of the clients is a standard of
30 working days and there is even a bigger chaos on project 50%
payments. Earlier one had to pay the tax after the payment has been
cleared by the client. Now according to the new rule that was enforced
from 1 July 2011, you need to pay the service tax within 30 days after
you raise the invoice or the 5th of the month, whichever is first,
irrespective of the payments status from the client.

According to me, this rule is highly detrimental to the growth of our
industry . On one end the client expectations are rising everyday and
the payments are delayed by a standard couple of weeks and on the
other end the vendors will now not work with you till you pay them in
advance. To top it off you might just end up taking loans to pay just
the service taxes !!!! .

While the outdoor and advertising industry has gathered arms and
gotten together to write to the relevant authorities and have already
begun the process of lobbying for a change. (Read today’s ET for more
on the service tax rollout progress and please note that we are not
the ‘essential’ services) I think it is high time that we from the ‘PR
Industry’ as a whole take up the initiative to do so too for everyone
in the industry.

I do not have the know-how to take this up but I am sure we have
enough people on this forum who would have the relevant expertise and
know how to give some direction to this. I am willing to be a part of
this or take up this initiative at best.

Any advice from the forum members on how to go about this or do we
even need to take this up ? Is there a loophole that can be explored
in the clauses that will help circumvent the ridiculous terms and
conditions of this tax ?

Regards,
Tarunjeet

Nucleus
Public Relations Division

Article:

By Abhijit Sengupta, CEO of Outdoor Adevrtising Professionals (I) Pvt.
Ltd.) & Touchpoint

Except for death and taxes nothing is certain. We all have heard it
several times isn’t it? When we look at the current changes in Point
of Taxation (POT) rules with respect to SERVICE TAX, we realise that
though the taxes (we are talking about service tax in particular)
certain the incidence of tax and its administration could keep
changing time and again. When it happens we keep complaining,
shouting, protesting and so on. And later on we realise that the best
thing would be to adapt and start following it. I am sure something
similar would happen in case of leapfrog changes in POT that would
come in effect from 1st July 2011.Without getting technical aspects of
those changes let us understand what has changed specifically for
media and advertising companies.

Till 30th June 2011 whatever invoice service provider raises, she has
to pay service tax thereon only once that amount is being collected
from the customer. From 1st July the tax has to be charged while
raising the invoice as usual and it has to be deposited to the
treasury on or before 5th of the subsequent month, irrespective of the
collection, In case, you operate in monopoly market and are privileged
to be able to collect the same in advance or in less than 30 days, you
need to pay tax element on or before 5th of the subsequent month.
The immediate reaction of many people has been, “oh in that case i
would raise my invoice only just before the collection and manage my
cash-flow.” People in finance ministry are very smart enough to take
care of the situation. The rules say that the invoice has to be raised
by service provider within 14 days from the “completion of the
service”.
“The completion of service” has to be a part of written contract and
cannot be left to the imagination of the service tax auditors. There
task is not to “imagine” anything but to increase revenue for the
department.
What if any service provider fails to collect? In other words after
the payment of service tax on the invoice if the same turns bad, then
there no recourse for the same. The service tax paid on subsequent bad
debts is a cost any service provider has to bare.
What are the implications for outdoor advertising agencies in
particular?

Average collection period for any outdoor advertising agency is in the
range of 70 to 170 days. On a monthly billing you need to pay the
service tax within 5 days from the end of the month. For every agency
managing this cash-flow would be a nightmare. Some of us will have to
borrow only to pay the tax, which means there cost implications as
well by way of cost of funds.
The documentation with respect to the contractual obligations ahs to
be water tight to the extent possible and there should be as less grey
area as possible, to be left for the interpretation of the service tax
auditors. “Completion of the service” would give rise to all kinds of
disputes and litigations with the department.
The above measures are within the purview of the agencies and they
would be internal controls. The following should be done by forming
industry association:

Media owners have become aggressive and they have already decided what
they want and what they would do for the same. Agencies’ association
has to deal with it work towards preserving their own interests.
While competing within they need to define basic hygiene factors and
stick to them. For example
Today there are agencies that go out and get the business at ZERO
agency commission and on top of it they offer certain percentage of
saving in media buying to that customer (sic!).
Some agencies while pitching for business offer crazy collection
terms to the clients.
If such practices continue unabated they would turn out to be
destructive for the entire business as a whole.

Agencies association needs to create a mechanism to define aspects as
to what constitutes the “service” and what would amount to the
“completion of the service” to avoid the potential are of litigation.
Even after doing that when dispute arises with the department it
should be represented and dealt with at the association level.
While an individual agency will have no bargaining power with the
department.  Senior officers in the department are instructed to lend
an ear to trade associations and forward their grievances to the CBEC
and finance ministry for resolution.
The moment the new Service Tax rules were brought in, the first two
steps OAP took was first to write to the industry body to come
together to understand the implications. The second step was to
immediately realign and partly redesign our internal systems and
processes to narrow gaps on billing, documentation and collection. Our
ISO QMS was already in place. We are extending this QMS system with
new provisions that would facilitate speed. We have taken this
unfortunate ordeal as an excuse and also an opportunity towards
meeting OTP (On Time Performance) and top quality QMS.
“We would love to see our competitors as well adopting to this system
since it would help the entire industry to stay afloat, survive the
onslaught and thrive in times to come.”

Tech PR in India, now an International Game – Watch out

William Mills Agency, the largest independent public relations firm focusing on technology in the United States, announced it has opened a new office in Mumbai, India and appointed Saba Kazi as vice president for William Mills Agency India. 

William Mills Agency India serves technology clients targeting the Indian market as well as Indian technology companies interested in offering their products and services within the United States.

Kazi leads William Mills Agency India’s operations throughout India from the Mumbai office. Her responsibilities are focused on leading the organization’s expansion plans and conducting public relations activities for clients. 

Kazi has been in public relations since 2001 and has served several major brands such as Experian Credit Information Company of India, Reliance Telecommunications, Reliance Infrastructure, CNBC India, Sony Entertainment Television, Bharti Airtel and FINO. Prior to joining the agency, she worked with Corporate Voice Weber Shandwick, Genesis Burson-Marsteller and represented Intercraft Trading and Bigadda.com.

 Kazi earned a degree in English literature from Mumbai University and studied journalism at K. C. College in Mumbai.

 “William Mills Agency India’s Mumbai office was opened to meet the need for communications services that are focused on India’s growing technology industry,” said William Mills III, CEO of William Mills Agency in a press release. “Working together, Saba Kazi and the William Mills team are leveraging their skills and experience in the tech industry into a competitive advantage for companies interested in selling their products and services in India, as well as Indian companies seeking to grab market share in the United States.”

 This is the second pure technology communications agency starting operations in India after Waggener Edstrom, which has its office in BKC, Mumbai headed by Madhuri Sen.

 Also heard that even Webber Shandwick is also in the process of strengthen its technology practice. This sends a clear message to other pure tech communications’ agencies or tech practices in the larger agencies of an alarming competition. Innovation and more value add will be the clear differentiating factors. Rationalizing ROI will be now the norm

While for Tech PR practitioners it is a good opportunity to move out of their comfort zones and learn some international best practices, but at the same the hike up their servicing skills as well as domain knowledge.

— 

Best Regards,

Vikram Kharvi
Reputation Management Consultant

Mobile: 9930143550  |  Email: pr.vikram@gmail.com

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