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Advertising Spending Seen Rising In GST Era

While the overall benefit to the economy from GST will have a cascading effect, more specific push could come from sectors like FMCG that saw lowering of tax on many categories which gave companies more headroom for advertising spends, say industry players.
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The advertising industry is expected to benefit as the economy improves (Representational image)
The advertising industry is expected to benefit as the economy improves (Representational image)
New Delhi: The advertising industry is expecting business to improve in the GST or Goods and Services Tax era, hoping that companies which benefited from the new tax regime will spend 
more on campaigns. According to industry players, while the overall benefit to the economy from Goods and Services Tax will have a cascading effect, more specific push could come from sectors like FMCG that saw lowering of tax on many categories which gave companies more headroom for advertising spends.

"Besides the overall impact, there will be specific upside depending on the categories various advertising agencies are engaged with," J Walter Thompson South Asia CEO Tarun Rai told news agency Press Trust of India.

Citing the example of FMCG sector, he said, "The lowering of tax for many products may lead advertisers to invest more in advertising...I believe the GST will give a fillip to more companies investing in brand building - resulting in more business for our industry."

Expressing similar views, White Rivers Media co-founder Shrenik Gandhi said: "As the economy benefits, the advertising industry is bound to benefit."

GST provides seamless flow of tax credit, making the services eventually cheaper. So effectively, there will be more amount left to be spent on advertising, he added. 

Mr Gandhi said globally the advertising industry "varies 1.25 times plus or minus the GDP" and while GST might have certain short-term implications, "in long term, it shall positively impact the GDP, eventually making it a benefit for the advertising industry".

Offering a counterpoint, Havas Media Group CEO - India & South Asia Anita Nayyar said: "There are a lot of things that need clarity, and it is too early to make a prediction." 

She, however, said that just as brands have lived with service tax it was introduced, GST would be no different.

"It is a wait-and-watch situation. And, for brands that have already locked their budgets for the year, it will be a bit more difficult to crack the code," Ms Nayyar added.

According to a report by consultancy firm EY, FMCG, automotive and consumer durables firms are set to advertise more after GST.

On the other hand, e-commerce, banking and financial services firms would see a negative impact, the report said.

Kotak Mutual Fund CIP Equity Harsha Upadhyaya said that due to the anti-profiteering clause, companies which have benefited under GST will pass on to the consumers and use the excess funds for growth of their business.

"If they use for their own growth, then the advertising pie will go up," he said.

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