MUMBAI: In light of multiple cases of tax evasion, the Comptroller and Auditor General (CAG) has recommended tighter income tax norms as well as mandatory tax deduction at source (TDS) for the Indian film and television industry.

In its latest report, CAG said it wanted revenue from sale of distribution rights of films. “We recommend that provisions for deduction of TDS on sale of distribution rights and sharing of proceeds from exhibition of films may be introduced,” said the report.

CAG also noted that 40 per cent of the advertising revenue was linked to the TV industry, which has grown at a good annual rate of approximately 17 per cent generating around Rs 265.5 billion (Rs 26,550 crore) in 2009. However, no tax is given at source. “We recommend that provisions for TDS on sale of time slots and on telecast fees should be incorporated in the Act,” said the report.

The report also voiced concern over tax evasion and sought widening of collection base. "Persons and entities associated with film and TV industry should be assessed in the specially created film circles. There are four film circles – Mumbai, Chennai, Hyderabad and Bengaluru – but 465 assesses were from outside this arrangement. Thus, the purpose of the creation of film circles to assess all film-related assesses at one place is not fully serviced,” the report said.

Another suggestion made was that Permanent Account Number (PAN) be recorded for making payments to persons associated with the film industry and the Income Tax Department should coordinate with Central departments and state revenue organisations.

CAG report also recommended that tax officials should keep a tab on incomplete and abandoned films. CAG said the film industry registered a growth of 9.7 per cent between 2005 and 2009 and generated revenues of around Rs 95 billion (Rs 9500 crore) in 2009.

Ironically, film industry leaders like Yash Chopra, Mahesh Bhatt, Amit Khanna etc have been voicing their concern for the last couple of years regarding the government’s passivity towards the film industry and multiple tax burden it bore.

At this year’s IFFI that was held in Goa, Yash Chopra had said, “Indian cinema is going places. Our young filmmakers are doing some great work and are winning global accolades. It is bringing so much recognition to our country. But what is the government doing for us? The film and entertainment industry is still being given the step motherly treatment. We are burdened with multiplex taxes – entertainment taxes, GST, copyright, VAT, stamp duty and many more to come. If some of these taxes get implemented, it will be very difficult to make films. Some very serious taxes are going to be executed by the government and if they are going to be implemented, which they will be… we may not be able to make films at all. The government must wake up before it becomes too late. We will be celebrating 100 years of Indian cinema in 2013, but it may be too late then.”