BackLobby group urges GST Council to cut in-cinema F&B tax
Lower taxes are expected to make cinema visits more affordable and boost revenue for theatre owners
PremiumNew Delhi: The meeting of the Goods and Services Tax (GST) Council, scheduled for later this week, will discuss a proposal to reduce the taxes on certain categories of food and beverages (F&B) sold inside cinema halls from the existing 18% to 5%. The move is a direct outcome of efforts made by the Multiplex Association of India (MAI), an industry lobby group representing cinema owners.
The MAI collaborates with regulatory bodies and industry stakeholders to represent the issues faced by the exhibition sector, and highlight both the opportunities and challenges.
The MAI’s representation to GST Council is based on feedback from some of its members on the difficulties after the local authorities mandating 18% taxes on F&B in certain states and towns. This demand contradicts the categorization of F&B inside cinemas as restaurant services, which should be 5%, according to the GST Council’s guidelines.
“Cinema theatres across India levy 5% rate on F&B since GST was introduced. However, in the past 12-15 months, some cinemas received notice from local bodies that F&Bs in cinema’s can’t be treated as restaurant services. Instead of fighting at the local level, we decided to make a representation to the government to avoid unnecessary litigation," Nitin Sood, chief financial officer at PVR Inox Ltd, said.
F&B is one of the most significant sources of revenue for cinema owners and lower or flexible pricing will lead to better financial access to theatres for audiences. “The cost of the movie-going experience will come down and any rebates or subsidies will only make the sector healthier, since it really has been a tough scenario over the past few months," Akshaye Rathi, an exhibitor and film distributor, said.
Considering it is crucial for cinema operators as they contribute 30-32% of annual earnings, trade experts said F&B is the only revenue source cinemas do not have to share with producers or distributors, unlike the earnings from say ticket sales.
While the distributor-exhibitor share keeps changing based on an individual film in the first week of launch, exhibitors take a 52.5% share, which changes to 50% in the second week, and 47.5% in the third. It is also important considering the massive rent and maintenance costs for theatre owners. According to its earnings results, PVR posted revenue of ₹554.2 crore for F&B in the first half of FY23, up 3% compared to the same period of FY20. It was at 32% of overall income.
INOX clocked revenue of ₹274 crore from F&B sales in the period, accounting for 28% of total earnings.
Media and entertainment industry experts point out that Bollywood continues to lag behind pre-covid levels despite cinemas operating at full capacity for more than a year now after the lifting of pandemic-induced curbs. Film business in the Hindi-speaking market is nearly 40% less than the pre-covid levels and the first half of 2023, which clocked in about ₹1,900 crore in the Hindi belt, has seen only one notable Bollywood hit in Shah Rukh Khan’s Pathaan. Moreover, Hindi film releases have remained mostly inconsistent during the period with several weeks seeing no new movies while the mid-budget genre has completely moved to OTT.
Milestone Alert!Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.
