The Goods and Services Tax (GST) rolled out by finance minister Arun Jaitley will replace the current entertainment and service tax with a single 28 percent tax. Now this new GST regime — which will be implemented from 1 July 2017, may be good news for Bollywood, where entertainment tax is as high as 45 percent in metros like Mumbai. However, it could very well sound the death knell for regional cinema, mainly in South India.
The SIFCC will be roping in Rajinikanth and Kamal Haasan to use their clout in Delhi to modify the GST rate. “The show has to go on and the industry has to survive. For that, there should be a reasonable GST.”
In the film-crazy Telugu states of Andhra Pradesh and Telangana, which report high net box office collections, the situation is grim. The entertainment tax on Telugu films is low and varies from 7 to 15 percent. Once GST is implemented, it will translate into higher ticket rates and kill the common man’s interest in cinema. One of the leading distributor and studio owner Suresh Babu of Suresh productions , the son of Ramanaidu said, “Telugu cinema’s business model is predicated on low ticket rates which attract higher footfalls. With GST, ticket rates will go up substantially — and hinder the growth of Tollywood.”
This model is good for people in North who produce films with very high budgets. It is very bad for the regular producers in the south and especially in the south he opined. Most of the producers will stop producing movies and only very high budget movies will run he said.
“The GST of 28 percent will hit south Indian cinema badly. This is not only because existing tax rates are low, but also in states like Karnataka, there is no tax on Kannada films. Ticket prices are capped and the Tamil Nadu government gives tax-free status to Tamil films with Tamil titles and have a ‘U’ censor certificate. So far, regional cinema — including Bengali and Marathi — has worked well due to the low tax structure. Now, with implementation of GST, tax will double — or in some cases, treble.”
the GST would adversely impact the box-office collections of films in the state. Bills passed by Parliament allow local bodies to continue to collect entertainment tax under the GST regime. Kerala and some other states are now empowering local bodies (municipal corporations, municipalities, panchayats, local councils, district councils, etc) to levy an additional entertainment tax. While entertainment tax levied by the state government is subsumed in GST, the tax levied by local bodies would be outside of the GST regulatory framework. In short, we would end up charging 28 percent GST plus an additional 12 to 25 percent local bodies’ taxes.”
Even before the introduction of GST here the Telangana Government has agreed for hike in the cinema ticket prices across Telangana.
In Kerala, local bodies pay salaries to their employees mainly from taxes levied on cinema theatres. And most of these panchayats and municipalities are controlled by the ruling CPM and its allies, who have strongly objected to the GST.
In Karnataka, the situation is alarming as Kannada films aren’t subject to entertainment tax while other language movies, which are dominating the multiplexes in the state, are liable to pay 30 percent taxes. Now all of them have to pay GST. Recently, there has been a cap on ticket prices, with multiplexes not allowed to charge more than Rs 200 per ticket. In Bengaluru, other-language films Hindi, Telugu, Tamil, Malayalam and English will have an even bigger edge over Kannada films once GST is implemented.
“The film fraternity is taking up the GST issue on an emergency basis. We have already appealed to the government on the issue. If the tax rate goes up for Kannada films from the present zero percent to 28 percent, it will pose a serious threat to the very survival of the industry.”
Meanwhile there is panic in Kollywood, where — for the last 50 years — successive Dravidian governments (Read DMK/AIADMK) had a vice-like grip over the film industry. Cinema tickets were cheapest among all states in India in Tamil Nadu, where there is a cap on ticket pricing.
Tamil Nadu, which had various slabs of entertainment tax from about 12 percent to 30 percent, will now have a uniform GST of 28 percent from panchayat to metro cities, which means that a single screen in a ‘C’ centre will pay the same tax as a high-end multiplex in Chennai city.
 rolled out by finance minister Arun Jaitley will replace the current entertainment and service tax){kind=link}