There’s a change in Indirect taxation in India which involves integrating all the indirect taxes at Central and States level into one Tax namely Goods and Services Tax. Taxation model is new in here but other parts of world followed the same quite earlier.
What expected from the new taxation policy was relaxation in tax rates, which are probably highest in the world. But when the rates were announced earlier in evening, were surprisingly disappointing. For those unaware, Admission in a cinema will cost you 28% in lieu of incumbent State Entertainment Tax which varied state to state. Cause of surprise or disappointment here is that tax rate are increased instead of decreasing. In 2016, Nett and Gross ticket in India amounted ₹7100 cr & ₹8800 cr respectively. This broadly works out at 24% on Nett Sales and now 24% will be increased to 28% with implementation of GST.
The flat rate system will be boosting the Nett sales of films in states having higher tax rates presently which includes Maharashtra, Delhi, Uttar Pradesh and Bihar while vice versa in Andhra Pradesh, Tamil Nadu, Punjab, Madhya Pradesh. This basically translate in benefit to Bollywood and Hollywood films as they do major chunk of business in states to be benefitted by GST but blow to the regional divisions which contributes around 45% of country’s box-office revenue.
There have been questions on morality of entertainment tax earlier. In India, out of 1500 plus films released annually, barely 50 manage to recover their cost. Taxing such industry that too with this high rates is immoral. When incentives from government are expected for revival of industry such decisions are saddening.
What will be GST impact
By levying of GST, Bollywood will be benefitted as out of gross which is collected (assuming rate of tickets are kept same) at ticket window, less amount of tax will deducted which means more residual amount to Distributors and Exhibitors or Nett. If tickets rates are reduced in accordance with Tax rates it might help in brining more people in theatres.
Similarly regional film industries will be affected as they have to pay more tax than present rates until unless some sort of exemptions are granted to them while higher ticket rates due to fresh levy of GST may result in fall of footfalls.
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