Since June 2006, Tamil Nadu state government has exempted collecting entertainment tax for movies that have a Tamil title and gets cleared with a U certificate with the view to promote Tamil culture. This has become a restriction for movie producers and directors; but we’ve also seen many creatively named Tamil titles over the past 11 years. Along with the cap on ticket prices at ₹ 120, it has been a major motivational factor for moviegoers in Tamil Nadu. Starting July 1st, these are disappearing. Yes GST, I’m looking at you.
With GST, there will be no entertainment tax but one universal tax that will apply throughout India. This is touted to reduce tax load on consumers by eliminating stacking of tax; but as with most things in the current government, things don’t always happen per plan. Since the exemption rule is a state thing and GST is a central device, GST will be applicable on all movies. This will of course level the playing field for U/UA movies and will give way for more creative titles.
* Side Note
It’s worth mentioning here that we’ve always been paying a phantom tax for Tamil movies. In 2015, Madras High Court directed that moviegoers should receive the benefit of exemption; but cinemas have always charged ₹ 120 instead of ₹ 84 even if the movie had tax exemption.
With the debut of Goods and Service Tax, theatre owners will push for increase in the cap on ticket prices. With the tax for cinemas fixed at 28%, this will push ticket prices up to ₹ 160. Since we are already paying non existent taxes, GST will be a tax on a phantom tax. Effectively this makes a staggering virtual “tax” of 47%. Along with “online booking charges” and other ingenious ways multiplexes have conjured up to drive up the prices (like “pushback seat activation charges” for one), this could easily go way up to ₹ 250 or ₹ 300. If the cap is completely removed, these prices can hit the roof in the likes of Bengaluru and Mumbai.
Kollywood is the second largest film producer in India after Bollywood, producing more films than entire countries. Lower ticket prices has been an incubator to encourage the movie going culture and hence movie production in Tamil Nadu. How this will impact the current scenario is to be seen.
* GST Update (12 June 2017)
According to the revised GST rates, movie tickets that cost less than ₹ 100 will be taxed at 18% slab and above ₹ 100 will be taxed at 28%. While this looks good on paper, it is not likely we’ll see a reduction in price.
* GST Update (1st July 2017)
We understand that corporations may levy additional taxes over entertainment apart from GST. This will only worsen the situation described above.
A quick view of impact of GST on other products: Keep reading at: http://outfoc.us/1064