Bulk of an agency’s costs are fixed in nature - salaries, rent, electricity, communication, upkeep, among others
The association suggested that advertising expenses could be given weighted deduction while computing taxes
NEW DELHI :
Advertising Agencies Association of India (AAAI) on Thursday said it has approached the Centre for relief, as the covid-19-led lockdown has impacted both large and small businesses.
The advertising industry is crucial for the accelerated revival of the economy, said AAAI president Ashish Bhasin, in his letter to Union minister of information and broadcasting Prakash Javadekar, detailing the recommendations of the association’s members.
Advertising, like many other businesses, has been seriously affected. The bulk of the costs of agencies are fixed in nature, be it salaries, rent, electricity, communication, or media audience measurement reports. The income and cash flow has been under serious stress and unless there is some intervention, many businesses will either file for bankruptcy or will have to undersize.
The Indian Newspaper Society (INS) and the Indian Broadcasting Foundation (IBF), the media associations representing the interest of print and television, respectively, have permitted AAAI members to pay the money they have collected from their clients and did not insist on what was due to them.
However, the agencies said that despite this they will not be able to continue operations for long without government help
“We want principally money that is owed to us by way of income tax and goods and services tax refunds, and dues from government and public sector undertakings for our advertising bills to be settled immediately. We have also said that any payment made to us should not be taxed, as we are not going to make significant profit this year. We have also sought a direction to banks and our debtors for providing the much needed cash flow to pay salaries and meet other essential expenses," said Bhasin.
The other suggestion was to treat advertising expenses as an investment and have this cost amortized over the next three years. AAAI said this will encourage larger advertising outlay, which will help revive the economy faster. It also suggested that advertising expenses could be given weighted deduction while computing taxes.
“The government just needs to show a kind heart, as advertising is a critical input that can have a ripple effect in reviving many sectors of the economy," said Bhasin.