While the film industry is divided over the revised GST rates on movie tickets, we delve into the matter to find what's on the minds of the movers and shakers...
With the Goods and Services Tax (GST) getting implemented from July 1, watching movies might turn out to be a costlier affair in several parts of the country. Initially, a flat GST of 28% was levied on all movie tickets, regardless of their price. However, o Union Finance Minister Arun Jaitley announced revised GST rates, wherein tickets costing `100 and below were brought under the 18% slab, while those costing higher than `100 will continue to fall in the 28% slab.
While the industry feels that the rates are still very high, what has irked them even more is the possible implementation of a local body tax (LBT), which will vary across the country, making movies the only product/service with dual taxation. However, levying LBT is at the discretion of individual states. For example, while reports suggest that states like Maharashtra, Gujarat and Rajasthan are already empowering their local bodies to levy entertainment tax over and above the GST, states like Kerala have decided against the idea.
18% is Too a Small Relief!
Associations representing single-screen owners and multiplex chains met Maharashtra Finance Minister Sudhir Mungantiwar to discuss the implementation of the new taxation scheme among other things. Nitin Datar, President of COEAI (Cinema Owners and Exhibitors Association of India), who was at the meeting, told BT, "Some exhibitors are happy that GST rates have been revised; it will bring in some uniformity in the tax structure.
Earlier, while some states didn't levy any entertainment tax, some were levying 45% or more. However, smaller centres, where the tax rates were much lower than 18%, are likely to feel the heat. Of the 2,100 films made in India annually, only 400 are in Hindi. The rest are all regional films, of which few make a mark at the box office, despite being tax-free.
Regional films across the country will be in a mess because for them, 18% and 28% are still very high figures. They shouldn't have been taxed over 5%, given that they incur more losses than profits. Regional producers employ so many people despite their losses. For them, it will now be a fight for survival. Also, there's no clarity on the structure and implementation of local body taxes either."
Deepak Asher, President, Multiplex Association of India, says that 18% GST on cinema tickets priced under `100 is too small a relief. The mathematics is simple: Tickets priced below `100 form roughly 10% of the total number sold, which is around 6% of the revenue. Also, with the current rate of tax on cinema exhibition across India being around 19.5%, the new rates can prove to be detrimental, especially when they're clubbed with local body taxes.
He rues, "We are grossly disappointed because this will hamper growth. Cinema halls across the country have been downing shutters over the last two-three years, even in states where the tax rates were lower than 18%. Regional films that were so far exempted from entertainment tax will land in a suicidal situation with the new tax regime. Smaller multiplexes in the interiors depend on these movies. What will they do? We also have to pay an additional entertainment tax that the local municipal bodies will levy, depending on various factors. Where does that leave us?"
Modest estimates suggest that India approximately has 9,000 screens, of which roughly 4,000 are in the Southern states of Tamil Nadu, Kerala, Andhra Pradesh, Karnataka and Telangana, where most movies screened are in regional languages. Asher continues, "On multiple occasions, we requested that cinema be taxed lightly because it helps generate income, employment, add more screens and check piracy and black marketing. However, not only have we been placed in the 'sin industry' bracket, we have also been taxed heavily in two layers. And, we can't even escalate ticket prices beyond a point because that will affect consumer footfall. Only when we have more clarity on local body taxes can we decide the way forward."
If the municipal bodies choose to do away with the local body taxes, cine-goers in states like Maharashtra and Delhi could gain from the 28% GST rate, since the existing rate in these states is around 38% to 40% on an average.
On the other hand, it will have an adverse effect on states like Punjab, Andhra Pradesh, Telangana, Gujarat and Chhattisgarh where the rates were much lower before. Vikram Malhotra, producer of movies like Noor and Airlift, says, "The government has missed the only chance it had; they could have corrected so many flaws in the existing tax structure. To begin with, this is an expensive business, with very little scope to cut corners. Talent is the costliest element in my scheme of things and since it's based on an individual's demand and supply, I can't tackle its cost. For producers, it's a squeeze situation — we can't pass on our cost pressure to the audience, we have to tackle organic industry competition from every corner and grapple with dual taxation as well."
South India Impact
Actor Vishal (president, Tamil Film Producers Council, and general secretary, South Indian Artistes' Association) feels that price revision is necessary to cushion the impact of the new GST rates.
He says, "We will appeal to the state government to remove the cap on ticketing to break even. Since 2009, there has been no revision in ticket rates (the maximum that a multiplex can charge is `120). Of course, certain movies enjoy tax benefits (Thirty per cent entertainment tax is waived off for films that are titled in pure Tamil and have procured U certificate), but the fraction is quite nominal. I believe that theatre owners and distributors should be allowed to decide the price of tickets of every film — big or small — according to its capabilities. In Telangana, the government had announced flexible pricing policy to not burden the audience. For instance, if it's a Rajinikanth film, everyone would want to see it in the first three days, irrespective of the price. So, we should be able to increase the rates during the weekends and bring it down on weekdays so that the other section of audience can watch it, too. Also, we should focus more on the transparency in BO collections. These two moves should help us tackle GST."
A senior member from the Kannada Film Producers' Association said, "While the reduction of GST on single screens comes as a temporary relief, we have a bigger problem to contend with. Till now, our films were completely exempted from taxes, but with the multiplexes having the same tax rates for all languages, it will hit our consumers harder. We still are wondering how to get this problem sorted."
The Kannada film industry is hoping to ask the state government to waive off their share of the GST, given how the new tax will be equally split between the Centre and the state. Whether the state government will continue to lend its support to the local industry is the current topic of concern in Sandalwood.