In a letter addressed to the Minister of Information and Broadcasting, Prakash Javadekar, the Advertising Agencies Association of India (AAAI), India’s apex body for all major advertising companies, has asked the government to allow treatment of advertising expenses as an investment to encourage larger advertising outlays from companies.
The letter pointed out the plethora of issues faced by the industry and suggested steps to revive the business in ways that don’t impact government revenues.
ET has reviewed the copy of the letter written by the Ashish Bhasin, President, AAAI.
One of the main demands of the advertising body was that advertising expenses should be treated as investment and amortisation of this cost allowed over the next three years. This would encourage the consumer companies to spend more on advertisements and that ultimately would spur demand and help revive the economy faster.
“Advertising is the biggest driver of demand, and getting advertising rolling is going to be one of the biggest ways that we can get consumer demand up and bring things back to normalcy faster,” said Sam Balsara, chairman, Madison World. “As advertising costs a lot of money and public listed companies are conscious of spending, one of the suggestions AAAI made was that if advertising could be amortised over three years, it could provide an incentive to cash strapped and stressed advertisers to actually consider getting back to advertising.”
In the letter, AAAI has also suggested that advertising expenses could be given weighted deduction while computing taxes. In simple terms, every ₹100 spent on advertising, should be treated as ₹200, while computing the taxable income. “If India Inc spends money on advertising, it will have an upward spiralling effect and will revive the overall economy,” said Balsara.
The association has requested an immediate clearance of dues by the government, permission to use GST credits as well as relaxation in tax deducted at source (TDS) obligations. AAAI, which accounts for around 80% of advertising spends in the country, has also sought an additional credit limit from banks as and requested the government to consider advertising as an investment.
“What we have asked the government is very reasonable. We want principally money that is owed to us by way of income tax and GST refunds, and dues from government & PSUs for our advertising bills to be settled immediately,” said Bhasin, who is chairman India and CEO- Asia Pacific at Dentsu Aegis Network.
“We have also said that any payment made to us should not suffer any TDS deduction going forward, since there is unlikely to be any significant profit for the year. Further we have sought a direction to banks and our debtors that they provide the much needed cashflow to pay salaries and meet other essential expenses etc,” Bhasin added.
While AAAI agreed that tough steps taken by the government to reduce human impact of this pandemic were necessary, it noted that there was a huge cost attached to these proactive steps and the advertising agency business was staring at losses and job cuts.
The Indian Newspaper Society and Indian Broadcasting Foundation have permitted AAAI members to pay monies after they have collected from clients, and not on the due dates, in case of late payments.
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