Wednesday, July 19, 2017

GST at Cinema Theatres

GST is the most searched term, perhaps in the past 30 days or so. India transitioned to GST on the midnight of 1st July 2017 with a special session of the Parliament, which was attended by the Prime Minister and his Cabinet including members of the Opposition. Much has been spoken about GST so I am not going to delve in any further. But I am presenting my views on how GST in Tamil Film Industry is affecting the trade.


In Tamil Nadu, there was no VAT on cinema tickets prior to GST. However, there was an Entertainment Tax @ 30% on the ticket prices. The DMK Government, when they claimed power in 2001 provided a reprieve to the Tamil cinema Industry for the said Entertainment Tax if the film had a title in Tamil and was provided a U Certificate among a few other clauses. That’s when Sun Pictures was floated (a division of Sun Media Network which runs Sun Tv & 45+ channels in four regional languages). The reprieve was used by most Producers with fancy Tamil titles including the all time highest grosser of Superstar Rajnikanth whose film directed by Shankar was titled “Enthiran” meaning Robot in Tamil.


The ticket prices in Tamil Nadu have been capped at Rs. 120 for Multiplex screens and Rs. 100 for standalone Theatres. The 120-cap was inclusive of 30% ET, which means the actual earning to the Theatre Operator was only Rs. 84. However, due to the largesse by the successive Governments, the theatres were able to earn extra – the ET collection was not passed on to the Customers, rather pocketed in to their kitties – obviously because the Producers knew they could hard bargain with the Exhibitors for a higher Minimum Guarantee & higher Revenue Share as well. This vicious cycle has been going on for a while with 9 out of 10 cinemagoers unaware of the same.

On June 30th 2017, the TN Government passed a mandate where the local body tax was applicable at 30%, which was over and above the GST. Cinema Exhibitors got in to a huddle on the 1st of July and decided to protest the TN Government’s decision and shut down the screens for four days from 3rd – 6th July 2017 incurring a loss of over Rs. 400 crores to the Industry. TN Government decided to put the levy on hold and allowed the Theatres to operate as per old norms.


Now here is the catch; GST had just replaced the Entertainment Tax and was 2% lower. Which means, the ticket prices should have gone down or remained as they were. But the smart industry guys have played their cards well by adding 28% GST on to the Maximum Ticket Price of Rs. 120 which is against the spirit of GST implementation. Interestingly, neither the Central nor State Government have taken cognizance of this issue and cinema goers have been forced to shell out more from their pockets. With the already sky-high costs of Pepsi, Coke, Popcorn and other Food & Beverages inside the theatres, regular visitors have been dissuaded leading to a 30% drop in tickets sold. If this trend continues, more footfalls will reduce and would have a deep impact on the film exhibition industry. A few star-studded movies are in the pipeline, which will decide if this move by Cinemas to pass on the GST to customers will have a significant impact. With burgeoning OTT Apps & ever increasing movies screened illegally on websites, the fate of the film industry is facing a Damocles Sword.

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