The domestic animation and gaming industry has said that it may face a serious crisis if not given fiscal incentives in the coming Budget.
The industry's four-point agenda, submitted to the government, seeks a tax holiday for 10 years, removal of service tax, scrapping of sales tax on software and a 10-year exemption from import duty on hardware.
While the National Association of Software and Service Companies estimates the industry to reach a size of $869 million by 2010, more than 90 per cent of this will be accounted for by outsourced work.
Animation work for offshore clients is exempt from service tax, which is not the case for local work.
"We want the local industry to develop in order to sustain the growth pace of the animation industry as a whole. We hope the government will remove the service tax burden and grant us a 10-year tax holiday," P Jayakumar, CEO, Toonz Animation, told Business Standard.
The Federation of Indian Chambers of Commerce and Industry has sought a 10-year tax holiday for the industry. It also wants 10 per cent local content on Indian networks to be made mandatory. This, it has said, should be raised to 30 per cent over the next three years.
Ficci has also called for exemption of import duty on hardware for a 10-year period.
"The high-end machines used for production attract import duty. At present, the duty structure is as follows - basic duty of 12.5 per cent, CVD of 16.32 per cent, special CVD of 4 per cent. After including educational cess, the overall duty comes out to be 36.8%," Ficci has said in a letter to the finance ministry.
Currently, the animation industry in India provides jobs to over 5,000 people. It expects this to rise to over 30,000 within the next three years. Industry estimates the size of global animation industry at $50 billion with an annual growth rate of 8 per cent. India is registering over 20 per cent growth mainly on the back of outsourced works.
"When we talk of a booming animation industry, we forget that a bulk of this comes from work from China, Canada, the US and European countries. What the government can do is to incentivise the domestic industry by creating more animation-centric special economic zones and by giving tax holidays," a media and entertainment analyst said.