Advertising Agencies Association of India reaches out to Government for business continuity

• Ashish Bhasin, President of AAAI has sent a detailed set of recommendations on behalf of the members of AAAI, to the Union Minister of Information & Broadcasting Prakash Javadekar.
• AAAI has asked by way of IT & GST refunds from Government & PSUs for their advertising bills to be settled immediately.
• The recommendation has also asked for a direction to banks and the industry's debtors to provide the much needed cashflow to pay salaries and meet other essential expenses.

Everyone has been witnessing with growing alarm the spread of the coronavirus across the globe and in India. Our country has been on a lockdown for a few weeks now and governments, both Central and the States, have taken many effective steps to reduce the impact of this pandemic.

But all this is coming at a huge economic cost. The Advertising Agency business, like many other businesses have been seriously affected. The bulk of the agency’s costs are fixed in nature, be it salaries, rent, electricity, communication, upkeep, media audience measurement reports, etc. The income and cash flow has been in serious stress in the last month and unless there is some intervention, many businesses will either file for bankruptcy or will have to undersize considerably.

INS and IBF, the media associations representing the interest of Print and TV respectively, have been kind enough to permit AAAI members to pay monies they have collected from their clients and not insist on what is due to them on the due dates. But the continuity of the Agencies business cannot be for long without the help of the Government of India. In this regard, Ashish Bhasin, President of AAAI has sent a detailed set of recommendations on behalf of the members of AAAI, to the Union Minister of Information & Broadcasting Prakash Javadekar. In this he has stressed the importance of advertising industry for the accelerated revival of the economy.

“What we have asked the Government is very reasonable. We want principally money that is owed to us by way of IT & GST refunds, and dues from Government & PSUs for our advertising bills to be settled immediately. 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,” said Bhasin. “These do not lead to any revenue loss to the Government. They just need to show a kind heart. The timely help they will provide actually is the help they are providing to the people of India, since advertising is a critical input that can provide a ripple effect in reviving many sectors of the economy,” added Bhasin.

One other recommendation made is to treat advertising expenses as an investment and have this cost amortised over the next three years. AAAI believes this will encourage larger advertising outlay which will help revive the economy faster. In the same vein, AAAI also suggested that advertising expenses could be given weighted deduction while computing taxes. The suggestion was that every Rs 100 spent on advertising, should be treated as Rs 200, while computing the taxable income.

Here is the complete list of recommendations:

1.0 Advertising is an investment:

1.1 Advertising or brand-building expenses should be treated as an asset and be allowed to be amortized over the next three years. Many companies recognize the enduring benefits of advertising and this will encourage them to invest without fear of considerable decline in profits. This will no doubt spur enhanced consumption thereby accelerating the economic activity.

1.2 The advertisers can also be given an option to account the expenditure on a weighted scale. A Rs 100 expense could be allowed to claim an expenditure of say twice that amount (Rs 200), while computing income tax. This may encourage a higher level of expenditure by profitable companies, which again will accelerate the revival of the economic activity.

2.0 Government dues to be paid

2.1 The TDS on advertising agencies have always been significantly more than the profits they make. Several Crores of Rupees of IT refunds are due to each one of the agencies. Can this be immediately refunded for the past years, including for the Assessment Year 2019-2020?

2.2 Many of the advertising agencies have substantial dues from Government of India, as well as from the Central Government controlled PSUs. Can these be ordered to be released within the next few days?

3.0 Income Tax and GST

3.1 Since profitability and cash flow is going to be poor this financial year, TDS should not be deducted when agencies bills are being paid by advertisers. In any event, Advance Taxes will be payable if applicable as per Income Tax deadlines.

3.2 GST should be allowed to be paid on collection of bills by agencies, as against by 20th after the month of billing. If a firm date is indeed needed, this should be after 60 days from the current due date.

3.3 Government should not block the utilization of GST credit and release all credits blocked so far

immediately.

3.4 Government should stall all e-invoicing programs till further notice. This could add to the

disruption of the economic revival.

3.5 Transfer of accumulated GST input credit - allow establishments for utilization of accumulated ITC having the same PAN across all the registrations in different States. This will result in free flow of working capital and ease of doing business.

3.6 Speed up all the refund of GST applications within 2-4 weeks.

4.0 Business Credit related

4.1 Our industry is unique in that our credit terms with media owners are pre-fixed, while advertisers are under no legal pressure to pay us on the due date. May we request that the Advertising Service be categorised as an essential service, given the potential it has to revive the economy? And consequently, direct the advertisers to settle agencies’ bill within 45 days of receipt?

4.2 Media houses are much larger entities and therefore there should be a directive to provide additional credit to agencies, should the contra-payment be not available from advertisers. The agency cashflow is fragile and the business could come crumbling down in the absence of such a protection, at this time of economic revival.

4.2 Advertising Agencies, after significant drop in revenue, are struggling to match the cashflows. We would request you to get the banking sector to allow an additional 33% cash credit limit for at least one year, at prime lending rates, without any additional security. The additional cashflow will permit them to steady their business.