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The Goods and Services Tax is touted to be a transformative tax reform that will change the way the country shops, eats and lives. Movies have always been placed in luxury bracket, as a weekend relaxation and leisure activity with ticket prices varying arbitrarily across the country.
While a movie ticket down south in Hyderabad could cost you just INR150, to watch the same in a theatre in Delhi, you would have to shell out a good INR 450. And hey, we aren’t even talking about the popcorns! But with the enforcement of GST, this anomaly will settle for the good.
Entrepreneur India takes a look at how the Media and Entertainment Industry is going to change with the rollout of GST.
Cheaper Tickets in Most Cities
Ticket prices are going to be cheaper in most cities with GST in place, even though the movie industry currently falls in the 28 per cent tax bracket.
“Depending on states, an average of 30% tax is levied on tickets. Food and beverages are taxed at a VAT of 23.5%. GST rates for the entertainment industry are lower than the VAT and Service Tax. As movie tickets will attract GST at 28%, food and beverages will fall under the supply of food/drinks in outdoor catering and hence it will be at 18%. However, GST will have a negative effect on states which already have a low entertainment tax. It will actually have a mixed effect on the entertainment industry, depending on the states. For states with a high entertainment tax, GST will be beneficial as it will reduce the prices for the end consumers,” said Rakesh Dube, founder of Taxgenie.
Multiplexes to Get Crowded
With ticket prices mostly set to be cheaper, multiplexes will eventually see a rise in the number of people flocking to watch a flick. “Multiplex chains will save on revenues as there will be a uniform tax, unlike the current high rate of entertainment tax levied differently by different states. It may lower the average ticket price, and increase the footfalls in multiplexes,” said Ankit Agarwal, Managing Director, Alankit Limited, a recognized GST Suvidha Provider.
Film Industry Producers Cry Foul
Siddarth Roy Kapoor, producer and president of Film and Television Producers of Guild of India, has raised an argument that imposing 28 per cent tax on the industry and keeping it in the luxury bracket is a “huge setback”. Kapoor even argued that the media industry had already faced problems because of the growing online business and the spread of film piracy. The industry has proposed for a five per cent tax scheme.
However, Agarwal found a beneficial point for film producers. He said, “GST will be a big boon to film producers and studios that currently pay service tax on most of their costs, but cannot charge input credit on creative services (payments to artists etc.) as they fall under the negative list. Under GST, they will be able to claim credit of these services too, which will help in lowering the overall tax.”