Shares of leading multiplex chains PVR Ltd and Inox Leisure Limited. fell on Monday after the GST Council fixed the tax on movie tickets at 28%.
The entertainment industry was hoping for a lower tax rate and shares of these firms had run up in anticipation of the same. Analysts reckon the impact on the industry to be neutral under GST regime.
“It is disappointing to see the government is classifying watching movies as luxury and subjecting us to highest rate of tax. We were anticipating a lower rate,” said Nitin Sood, chief financial officer, PVR Ltd. told The Hindu over phone.
“These companies may be slightly unhappy that they have been bracketed in the highest category along with gambling and betting activities. That almost looks akin to imposing a “Sin Tax” on movies,” Angel Broking said in a research note.
However, multiplexes will benefit from subsuming of plethora of state and local taxes into one single tax and also from input credits. PVR and Cinemax may find the GST rates neutral at best, it added.
According to Crisil Research, the finalised GST rate of 28% is lower than the pre-GST tax of more than 30% (which varies widely across states).
However, what is making the industry nervous is exclusion of entertainment tax imposed by local bodies under GST, it added.
Shares of PVR Ltd lost 8% in the intra-day trading on Monday. Inox Leisure lost nearly 5% to close at ₹275.50.
