Mumbai: The Maharashtra cabinet on Wednesday approved a proposal to raise entertainment tax on cinema tickets of Rs.250 and above on Wednesday, leading to protests by exhibitors in the state that’s home to the Bollywood film industry.
At the same time, theatres in the state will be allowed to almost double the service charge they levy on customers.
“Due to high court orders, the state can’t have any control on prices of tickets but the new tax structure will help keep profiteering of multiplex chains under control as cinema is the major and often the only source of entertainment for large section of our society,” said state revenue minister Balasaheb Thorat.
The changes are likely to be implemented through an ordinance within a week, said an official who didn’t want to be named.
Entertainment tax will stay at 45% for tickets under Rs.250. It will be 49.5% for tickets priced at Rs.251-350, 51.75% for tickets at Rs.351-500 and 54% for anything beyond that.
The step is retrograde and shows why the state isn’t attracting investment, said Shravan Shroff, founder of Fame India, a theatre chain acquired and now run by Inox Leisure Ltd.
“What the government has failed to understand and appreciate is that over 60 to 70% of the entertainment tax that they collect comes from the very multiplexes that say are ‘profiteering’. When the world and other states in India are moving to lowering taxation, the government is raising taxes in Maharashtra,” he said.
The government has also allowed theatre owners to collect Rs.11 as service charges on all tickets, up from Rs.6 now.
Apart from this, single-screen theatres in small towns run by the municipal councils will get a five-year entertainment tax holiday, while those in grampanchyat areas will get a seven-year exemption.
The changes come in the face of long-standing demands by exhibitors for a reduction in entertainment tax.
“This is bad news for the growth of cinema in the state. Given the kind of service we provide we cannot even pass the burden on to consumers,” said Sanjay Dalia, president at Cinemax India Ltd, now owned by PVR Ltd.
The increase in the service charge, won’t offset the rise in entertainment tax for costlier tickets, said a senior executive at a multiplex chain, who didn’t want to be identified.