GST: Event community in the lurch?
With the capability of servicing 300 crore invoices in a month, the GST bill will immediately see 80 lac people migrating onto its network. But as the country tries to make sense of perhaps the most monumental development in taxation seen by post-independent India, the event industry braces itself for a possible storm that’s about to hit.
An industry that’s built around consolidated efforts of event planners and event service providers, India’s event management community owns a market share of approximately 7000 crore, a sizeable number. Widely and consistently slammed for its disorganized nature the industry seems to have made reasonable progress over the past few years in this context, but is still far from home. To make matters critical the GST bill is around the corner and the fear is that the industry may not be on grounds sturdy enough to sustain its after effects.
Besides the brief mention of Entertainment Tax in the GST guidelines the event industry has been completely neglected evoking a state of near panic among event professionals who are now left with no better option other than to wait and watch.
“Chartered accountants like me have lost thirty years of education in one shot”, says Sandeep Bhandari, Chief Financial Officer at CS Direkt, a 23-year old events and exhibitions agency servicing clients like Mercedes, Canon, Microsoft. “With the GST bill coming into play existing systems will collapse and new processes will immediately be in place, but since the guidelines for the event industry are so obscure it is a stressful situation to be in”, he adds.
An event company operates in a manner very different to a traditional business. Bhandari explains, “While the client may be from Mumbai, the agency could be from Delhi and the event may physically take place at a hotel or stadium in Jaipur with inputs from various other service businesses including caterers, sound and light technicians, entertainers, florists etc. In such a case the event planner may be expected to register in Jaipur, or else, forego the ‘input credit’- a provision within GST to recover cost.” It has also been made clear that no input credit will be given on account of taxi bills and food and beverages, a huge drawback for event planners who are required to travel frequently between cities for reconnaissance purposes. Moreover event planners may be required to bear additional taxes levied by local authorities beyond the 28% GST, another matter of grave concern.
A possible issue could also be the transfer of goods between cities. “If an event company has to transport a hangar between states the structure would need close to ten trucks. In such a case the valuation of goods would be very difficult to explain”, laments Bhandari. The upside however is that VAT would no longer be levied on goods being transported across states as it will now fall under GST.
The Event and Entertainment Management Association foresaw these challenges and approached government authorities in March this year from where they were directed to file a petition. In order to educate agency partners the association has also been organizing seminars on implementation of GST across various cities including Delhi, Jaipur, Mumbai, Chennai, Hyderabad and Kolkata.
Sabbas Joseph, President of EEMA and founder of India’s premier event agency Wizcraft, stated at a seminar in Mumbai, “We have identified the implementation of GST in our country as one of the biggest disruptions that we need to be ready for. Taking this forward, EEMA is launching the ‘Know GST Program’ across the country for the events and experiential industry, so that we educate ourselves, our CFOs, finance teams, and also the vendor-partner community across providers of technical infrastructure, event infrastructure, talent, hotels, venues, etc. The program has knowledge partners like EY, Deloitte and ASCAA supporting our efforts.”
Keeping with the optimistic stance, Vinod Janardhan, Secretary of EEMA- Maharashtra and founder of Mumbai based event agency Team Rustic exclaimed, “GST is a transformational business process reform, eleven years in the making. It is unfair of people to talk of GST readiness now especially since authorities gave us a long heads-up towards its launch.” Trying to take the pulse of the situation he added, “The GST would bring the small and medium units under a tight regulatory regime that would be IT-driven but it may also open the new option of small and medium business acquisitions. Chances are margins will improve by 1st quarter in FY 2018 – 19. Certain adjustments will be required, sure, but change is an inevitable part of every business’ growth.”
While calculations and theorizing continues the proof will be in the pudding in a matter of days. And lets not forget, a large part of this will be determined by the clients needs too.
Around The World