Indian multiplex owners still struggling with GST, hope for tax respite

New Delhi: A little over six months after the implementation of the goods and services tax (GST), multiplex owners in the country are hoping for some respite from the exorbitant tax rates currently in place. The Indian film industry that produces close to 2,000 movies a year across multiple languages is working with the 28% rate levied under the GST since last July.

Especially for states that previously worked with rates as low as zero, this has meant not just an increase in ticket prices but a boost to movie piracy as well.

“Obviously, the top priority is for entertainment tax to be lowered,” said Rajendar Singh, vice-president, programming and distribution, INOX Leisure Ltd. “Cinema is not just the cheapest but the only form of entertainment for many in this country.”

The GST Council should definitely address the issue of ticket pricing which should be brought under the 18% tax regime for the betterment of the multiplex industry, said Amit Sharma, managing director, Miraj Cinemas. There should also be a systematic mechanism on tax exemptions which were given prior to the GST regime as multiplex owners have invested lots of money into it, he added.

India, traditionally, followed state-specified rates of entertainment tax levied on individual movie tickets—while states like Delhi and Maharashtra worked on figures of 40% and 45%, respectively, others like Punjab had zero per cent tax rate. All of that has changed with GST coming in last year and multiplex owners have consistently complained of the previously low blended entertainment tax across the country getting impacted. States with low rates previously have suddenly seen ticket prices spiral. For example, in Andhra Pradesh, entertainment tax has gone up to 28% from 16.66%.

Worst hit by this move have been single screens, which are not as well-equipped as multiplexes to combat the crisis. Restricted to playing 4-5 shows a day and one or two films at a time and working on rental basis, where they command a fixed share of 20-25% of a movie’s box office compared to revenue-sharing arrangements like the multiplexes, their state has been quite dismal lately.

There are other reasons too to support a lower tax rate. India has one of the largest film industries in the world despite which its screen penetration is among the lowest—less than 10,000 screens for a population of 1.25 billion, as compared to China’s 35,000-plus screens for a population of 1.35 billion. Moreover, the fact that movie-viewing, a clean and wholesome means of family entertainment, has been placed under the 28% regime, along with activities like gambling and racing, has theatre owners worried.

Singh said the other need of the hour is a reduction in or elimination of local body taxes. Many states, especially in the south, have empowered local bodies such as municipal corporations, municipalities, panchayats, local and district councils, etc. with the ability to levy an additional entertainment tax outside the GST regulatory framework. That essentially means that cinema owners have been paying not just the exorbitant 28% GST, but a 10-25% local body entertainment tax on top of that.