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NEW
DELHI: National industry body Ficci has demanded that the
government must give several tax exemptions and holidays to
let the animation, gaming and VFX industries, which is growing
faster than the overall entertainment industry, realise its
full potential.
Ficci
has demanded in the budget for 2008, the government must give
a 10-year tax holiday, removal of service and sales taxes
on the software used for production for 10 years, exemption
of import duty on hardware for 10 years, and other facilitating
measures.
Interestingly,
it says also that as there is no Indian channel with 24 X
7 indigenous animation content, 10 per cent of the time on
entertainment channels must be reserved for such content.
This will give local content and talent a major boost.
The
memorandum from Ficci says that though the animation, gaming
and VFX industry is growing in leaps and bounds, the full
potential is yet to be tapped, despite the projection that
the industry would grow hugely by next year.
Ficci
estimates show that the animation industry today stands at
Rs 13 billion and is expected to grow to Rs 43 billion by
year 2009, with a CAGR of 35 per cent.
Similarly,
the gaming industry is expected to grow from Rs 360 million
to Rs 13.50 billion by 2009, with a CAGR of 78 per cent.
"The
growth rate in these sectors are much higher than overall
media & entertainment sector, which is expected to grow
at a rate of 19 per cent," says Ficci. The industry could
be a major export revenue earner as well as provide massive
employment.
Ficci
says that after Information Technology, the biggest export
earners for India are Animation, Gaming and VFX, but the overall
business model existing at present, which is a low-end BPO
approach, is stunting its growth.
The
Ficci document stresses: "Exports in this vertical can
be looked in two ways: one, a purely outsourcing model in
which production houses provide services to overseas studios.
This is low-end work in the value chain with more of a BPO
approach.
"The
other is revenues earned from exporting the finished product
(the intellectual property developed in India for domestic
/ foreign markets) to global audiences.
"Both
the models have tremendous potential for foreign exchange
earning for India. But it is better in the long term if we
move up the value chain and have indigenous content with both
domestic and foreign appeal."
Ficci
estimates that in the next five years, India would require
more than 30,000 trained animators and gaming professionals.
"If
this industry is nurtured properly, it can meet the government's
objective of employment generation, and the latter should
aid in the setting up of centres of excellence on the lines
of IITs and IIMs for the animation and gaming industry,"
says Ficci.
Ficci
feels that the other direct impact of aiding these industries
would be building Brand India better, by engaging the country's
massive talent pool in creating content for Indian as well
as global audiences by transferring India's 5,000-year-old
time- tested legends into the new media.
"Animation
could be another way of creating "Brand India" among
NRIs / PIOs and other global audiences. Currently when India
is increasingly garnering attention in the world arena, it
is the right time to reach outwards through this medium,"
Ficci says.
Ficci
points out to models of Korea, China, Singapore, etc., which
enjoyed their respective government support, so much so that
40 per cent of the animated content in the US is Japanese.
"The
reason for such a pattern is that countries like Japan and
Canada have developed very strong domestic markets, and once
a domestic market gets enough consumable content, the same
can be routed for exports," says the memorandum.
Ficci
reminds that the Korean government sees animation as the most
competitive industry for the 21st century, and has provided
massive tax reliefs.
"(Korean)
application guidelines specify that companies whose projects
have been accepted by a Korean broadcaster can apply for up
to 40 per cent of their production budget," Ficci says,
demonstrating the massive support system there.
So
far as the animation industry is concerned, Ficci says that
it is now covered under Software Technology Parks of India.
The
problem, says Ficci, is that this holds good for a BPO nature
of work where outsourcing is the main module and most of the
studios which are getting benefited from STPI have to make
sure of an export commitment of more than 85 per cent.
"As
a result many Indian studios wanting to produce original content
based intellectual property and use art and talent from India
to produce animation stories do not get any such benefits,"
explains the memorandum.
Creating
original content in India attracts custom duty and also the
freshly levied sales tax (VAT) on off the shelf software (12.2
per cent, which might increase further) and further also the
income tax component.
"This
is leading to more and more studios working on foreign content
and a severe lack of animated Indian stories in our domestic
television schedules," laments Ficci.
Hence
Ficci's key proposals for the animation, gaming and VFX industries
are
- Tax
holiday for 10 (ten) years, so that cost of creating intellectual
property (original content) comes down drastically and the
industry becomes viable
- Removal
of Service Tax
- Removal
of Sales Tax on the Software used for Animation, Gaming
& VFX production for a period of 10 years
- Exemption
of Import duty on hardware for a period of 10 years
-
Market Development Assistance for overseas business promotion
-
10 per cent mandatory local content on the networks to began
with
"Finally,
we feel there is negligible revenue accruing to the exchequer
currently as no new Indian IP is getting created. If a tax
holiday is given, revenue will flow into the exchequer funds
in a couple of years as the industry will gain impetus and
encouragement to grow. In this regard the IT sector can be
looked at as a role model," says the Ficci memorandum.
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