The much talked about goods and services tax (GST,) is expected to roll out at the start of the fiscal year of 2017-18. For this, the GST for cinema halls has been set to 28% in the place of entertainment tax, which makes it a luxury tax. This means that instead of varied taxes levied by cinema houses on the sale of tickets in different states, all will have a set 28% to pay to the government.
Despite many protests from several organizations, including the Film Federation of India, this step was taken by the Central Government. It has to be noted that in many states there is no entertainment tax, especially on regional cinema and some exempt tax on tickets priced below Rs. 100. This 28% is, in some cases a good point as it brings out the actual collections of the movies instead of the inflated amounts shown to the press. But on the downside, this will affect the regional cinema.
In the Telugu speaking States of Telangana and Andhra Pradesh, the entertainment tax is set to 14% for all local films and 24% for other language films. In states like Assam, Punjab, Jammu and Kashmir, Himachal Pradesh and Uttaranchal, there is no tax on cinema. Maharastra, Jharkhand, Karnataka and Tamil Nadu have this rule of exempting taxes on all local movies. While in West Bengal, only 2% tax is levied on local movies.
For the consumer:
Without the GST, the consumer, in general, pays 14.5-15% which includes broadcast services like television, films and also digital content. Apart from this, the average tax levied is 12-14%, which increases the tax even further to 29%. And with GST this will increase significantly and almost reach 56% (28% digital GST and 28% at the movie hall.)
For the cinema halls:
This increase will also be a dilemma for cinema halls if the consumer opts to pay the increased prices. The base fare for a multiplex is Rs. 127.83 and with the entertainment tax of 15.1% (19.17,) the price of the ticket is charged at Rs. 147. But with the tax being increased to 28%, it will be Rs. 35.79 instead of Rs. 19.17, which brings the ticket price to Rs. 163. For the single screens, the total fare for a balcony ticket is Rs. 90, which includes the entertainment tax of Rs. 12.60. But with GST, the base fare of Rs. 77.40 and GST of Rs. 35.79, the ticket fare will be Rs. 113.19. But with the GST being paid completely to the government, the cinema halls will be collecting only the base fare.
For the producers:
It is estimated that this surge in price will affect the regional producers and decrease their revenue by 12-18%. In general, of the total movies released, only 15% of them do well at the box office. Films of the big budget like Baahubali, Bhajrangi Bhaijaan and Dangal are a few that make huge marginal profits at the box office. Despite being the 5th largest entertainment industry in the world, there will be a lot of small budget movies that do not make huge profits.
This move by the Central Government will be a huge blow to the regional cinema, as this will discourage the regional content. Regional cinema, in general, is made on a limited budget. When released, the amount made by the cinema houses on the regional films will be given to the producers based on the profits gained by it. Also, these movies will be released in the states of the set vernacular boundaries.
But with the increasing ticket prices, it is bound to happen that distributors will be reluctant to pay the expectations of producer for the regional cinema. When this happens, the producer will have losses from two ends, one in the form of less distribution and satellite rights and the other loss of percentage from the entertainment tax in the cinema halls. This 12-18% loss will not be a matter for big budget films, but when small regional movies are released, producers will face huge revenue loss leading to the decrease in the number of movies released.
In conclusion, though there might be plus side to the GST, it will be a loss to the regional cinema but not Bollywood and big budget films as they get released all over the country and can gain profits across all states. But the vernacular movies including Telugu, Marathi, Tamil, Bhojpuri, Malayalam, Karnataka, Bengali and others will face huge revenue losses.
