9th June 2017
With the government machinery speeding up the process of GST implementation, the country is expected to come under the single tax umbrella from July 1. While the talk of the town has been how the newly-adopted tax system is going to catapult the GDP rate into ascendancy, there are doubters as well. India being a growing economy is still caught in a bit of dilemma to ascertain various fields and in what bracket the said fields can be categorized as far as the taxation under the new laws is concerned. One of the major talking points has been the cinema that runs in the veins of this country across length and breadth. And given how it is going to impact the life of movie-goers, there is a fair chance of the new tax system creating discomfort in this section of the society.
The general accepted notion is that nothing binds India like Bollywood and cricket. Bollywood is not India and India is not Bollywood. There is a bigger chunk that avidly follows regional cinema as well. GST being the uniform tax system will impact every form of cinema; and hence the problem.
Because so far the movies in India have been categorized as local, regional and national and these criterion were considered before finally zeroing down on the tax that would be levied. But with the advent of GST and then its implementation the existing system of classification is bound to get wiped out, vis a vis the tax policy of the central government.
The GST council meeting that was held in Srinagar sometime back revealed that the cinema tickets in the country will be taxed at 28%, effectively making watching movie one of the highest taxed services. And despite that there is enough ambiguity over how it is going to impact the pricing, although it certainly will subsume the entertainment tax. Some quarters are not pleased with categorizing cinemas as luxury. However, with the kind of economy India has, that seems legit. To understand things better, here is how entertainment tax is levied in different states currently.
1.Andhra Pradesh - 20% (15% for Telugu Films)
2.Assam, Himachal Pradesh, Jammu & Kashmir, Rajasthan, Punjab and Uttrakhand (Nil)
3.Bihar - 50.00%
5.Gujarat -20.00% (0 for Gujarati films)
7.Jharkhand -110% (Nil for Jharkhand Films)
8.Karnataka -30% (Nil for Kannada Films)
10.Madhya Pradesh -20.00%
11.Maharashtra -45% (Nil for Marathi Films)
13.Tamil Nadu -15% (Nil for Tamil Films)
14.Uttar Pradesh -30% to 40%
15.West Bengal- 30% (2% for Bengali Films)
As mentioned already, the tax levied on movies under GST is at the highest of all the four slabs, recently finance minister ArunJaitley said that the abolition of entertainment tax, which is as high as 100 percent in some of the states, will see a drop in the prices of the movie tickets.
As far as the Multiplex operators are concerned, they have shown concern saying that lower rates would have led to more footfalls for movies. It is noteworthy that the government has considered movies such a luxury that it has been placed in the same slab as casinos and five star hotels. Apart from the entertainment tax that ranges from 28 to 100 percent, the cinema halls also play 15 percent of service tax.
Of late the entertainment industry has had some issues with some of the single screen theatres shutting down. Only in those states where the entertainment tax combined with service tax was higher than 28 percent is likely to benefit from the new policy. Some of the states do not levy any tax on local movies and which is why they are going to be at the receiving end of the deal.
Some of the experts believe that the Indian Hindi film industry is going to be the major beneficiary out of the newly adopted as the entertainment tax is as high as 45% in states such as Maharashtra. But regional cinema which always had low tax rates might not be at advantage. Since there is a lot of ambiguity over ticket prices all the involved stakeholders would have to wait before studying the aspects regarding the share of the distributors, food and beverage providers before ascertaining the actual price.
Also there have been voices saying that the movie industry also functions on the theory of demand and supply hence that also needs to be factored in before making the final call on as to how the new taxation system is going to impact the business and thus the consumers.
India is already battling the issues with piracies. The moot point that is missing in the debate surrounding the GST and cinema is that how an effective policy can be carved out that can prevent the plague of piracy and attract more crowds to theatres. The diminishing culture of single screen theatres has not helped either. Ask a regular movie-watcher and he would tell you how beverages and food at multiplexes are a bigger headache than the price of the movie ticket.
Eventually, it leads to a situation where the avid movie watcher out of compulsion gets selective and only goes for a handful of movies and settles for piracy for those which he does not find interesting enough to shell hard-earned money on. How GST comes up with an initiative to approach this modern problem is what will be interesting to see.
2017 © Monetic Corp Consultants Private Limited - U74999DL2013PTC261819
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