NEW DELHI: In a major disappointment to the infotainment sector and particularly the film industry, the Union Budget for 2010-2011 has ignored most of the demands made by the industry and even by the Information and Broadcasting Ministry.

However. Finance Minister Pranab Mukherjee today announced a rationalisation in the customs duty structure for import of raw stock by charging customs duty only on the carrier medium to remove the differential rates between importing digital masters of films and cinematograph film. The same would apply to music and gaming software imported for duplication.

However, Mukherjee said "in all such cases the value representing the transfer of intellectual rights would be subjected to service tax."

He justified the service tax, saying that "in keeping with the tradition of Indian cinema, I shall provide a surprise ending."

At the outset, Mukherjee said India is a nation of movie-goers, and the film industry had been experiencing difficulties in importing digital masters of films for duplication or distribution loaded on electronic medium vis-a-vis those imported on cinematographic film, owing to a differential customs duty structure.

However in such cases the value representing the transfer of intellectual rights would be subjected to service tax, implying thereby that all revenues generated out of transfer of Intellectual Property Rights will be subject to service tax.

Also, promotional material like trailors and making of films imported free of cost in the form of electronic promotion kits will be fully exempted from basic customs duty and countervailing duty.