With the rate of tax fixed at the highest slab of 28% for entertainment by the Goods and Services Tax (GST) Council, there is confusion over whether it would lead to an increase in cinema ticket prices in the State.
In Tamil Nadu, ticket prices are capped at ₹50 for single screens and ₹120 for multiplexes with three or more screens. This price includes entertainment tax, which ranges from 20-30% based on location (cities or districts).
This is how the ticket price break up works: ₹120 includes theatre maintenance charge of ₹1 and entertainment tax of 30%.
Pricing and taxation for films has been a politically sensitive issue.
In 2006, the DMK government issued an order granting 30% entertainment tax exemption for films with Tamil titles. Then the AIADMK government vetted it further saying Tamil films which satisfy certain conditions will be given exemption.
The industry is confused over whether the entertainment tax exemption granted to Tamil films goes off under the GST and also the way the ticket prices would be calculated based on the new rates.
‘A challenge in T.N.’
“The entertainment tax of 28% GST is expected to eliminate all State taxes. The average entertainment tax rates have ranged between 25% to 30% depending upon States. So there may be a marginal increase in some States. In Tamil Nadu, it is going to be a challenge if the ticket price cap of ₹120 continues. Fate of tax exemption to regional cinemas, in view of pan-India 28% rate, is unknown,” Priyajit Ghosh, Partner, Indirect Tax, KPMG, said.
“The industry bodies have called for a meeting to clearly analyse the impact on the cap. Going forward from July 1, it will mostly be ₹120 plus 28% GST for multiplexes. We are awaiting further clarity and confirmation from the department concerned on the same. Most importantly the entertainment tax exemptions being given for select U Certificate films by the State government will not be there from July 1,” said Udeep B., Managing Director, Mayajaal.
“We are still looking for clarity on ticket prices. It looks like the exemptions granted for Tamil films would go under the GST. If the ticket price is going to be capped at ₹120, it is going to be unsustainable for us,” Nitin Sood, CFO of PVR, a leading multiplex company, said.
“The ₹120 cap would be taken as base price and 28% GST would apply to it. Another issue is most states have allowed local bodies to collect entertainment taxes. Since local bodies are not part of GST, they can levy their own entertainment taxes which would be a steep increase,” said Utkarsh Sanghvi, tax partner — media and entertainment at EY India.
Exclusion of entertainment tax imposed by local bodies under the GST remains a worry for industry participants, according to Crisil Research.
Freedom to choose titles
According to Entertainment Industry Analyst, Sreedhar Pillai, “This will give freedom and liberty for film-makers. Now they can have any title of their choice.” On the ticket prices, he said there was confusion on the tax rates and there was no clarity yet.
Film Employees Federation of South India expressed disappointment over fixing of 28% rate in GST. In a statement, it said this would be a big blow to the industry which was already facing challenges in the form of online piracy and urged the Finance Minister Arun Jaitley to reconsider the rates.
