The announcement of the Goods and Services Tax (GST) rates came as a disappointment to the film industry, specifically to the exhibitiors, as cinemas
were put in the 28 per cent bracket.
Interestingly, other categories in this bracket include luxury goods, casinos, races and 5-star hotels. The Multiplex Association of India (MAI) has appealed to the government to reduce this levy in the interest of the survival of the film industry.
The letter, signed by president of MAI Deepak Asher, points out the various challenges that the industry is facing, including lack of screens, decreasing footfalls and competition by Hollywood.
It adds that the total tax levied on cinema house may actually be more if the local bodies decide to levy an additional tax.
“Many states are now empowering local bodies (municipal corporations, municipalities, panchayats, local councils, district councils, etc.) to levy an additional entertainment tax. While entertainment tax levied by the state government is subsumed in GST, entertainment tax levied by such local bodies would be outside of the GST
regulatory framework. In other words, according to the current tax regime, the entertainment tax levied by such local bodies would not be creditable under the GST
regime and would end up being an additional tax. In substance, cinemas
could well end up paying, not just a prohibitive 28 per cent GST, but possibly a 10 – 25 per cent local body entertainment tax as well,” Asher argues in his letter.
The exhibition industry, which includes single screens and multiplexes, was rallying for the implementation of GST
in the hope that the taxation will decrease. Until now, the exhibitors paid blended taxes depending on the tax regime of the states. So the tax component varied from state to state.
“We were hoping to be placed in the 12 to 18 per cent slab. This would have been a balanced approach to the taxation issue for the exhibition industry,” says Ajay Bijli, chairman and MD, PVR
Ltd, the largest multiplex chain in the country with more than 500 screens.
He adds that while the burden of taxation will be felt equally by multiplexes and single screens, exhibitors in Tamil Nadu, Karnataka and Madhya Pradesh will have a particularly tough time since the government (state) has levied a cap on ticket prices in the state. In this case, since the ticket price cannot be raised, the operators stand to take a major hit in the bottom-line, especially because all three states had entertainment tax levy less than 28 per cent.
#CA Amit Shah & Co.