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  4. As stalemate continues, here's why Tamil Nadu’s double taxation on theatres defeats the idea of GST

As stalemate continues, here's why Tamil Nadu’s double taxation on theatres defeats the idea of GST

Decoding why the Tamil Nadu film fraternity believes that the state's decision to levy an additional 30 per cent tax on cinema halls could bring the entire industry to a grinding halt

Parimal Peeyush, New Delhi [Updated:05 Jul 2017, 3:39 PM IST]
Over 1,000 theatres in the state are shut in protest- India Tv
Photo: PTI Over 1,000 theatres in the state are shut in protest against the local body tax

The Tamil film industry, which churned out over 290 films in 2016, recorded a gross turnover of over Rs 1,700 crore in 2015, is currently in a state of turmoil. Around 1,100 theatres of the 1,600 odd screens across the state are shut and are on an indefinite strike that began Monday. Theatres halted advance bookings of tickets from Sunday, all shows were suspended and, in significant loss of revenues, as many as 10 Tamil films released in the past two weeks will not be screened.

While the rollout of the Goods and Services Tax may come across as the likely reason for this protest, that is not the case. What theatre owners in the state are protesting is the additional 30 per cent local body tax over and above the GST rates that the AIADMK government in the state has slapped on film trade that has left them fuming.

And rightly so. Tamil Nadu, which until now reserved the distinction of being the state with the lowest taxes for films, is now the only one to have imposed this additional tax burden on the film industry. Under the GST rates fixed by the all-powerful GST Council, cinema tickets costing Rs 100 or less will be taxed at 18 per cent, while those costing above Rs 100 will be taxed at 28 per cent.

The story was one of contrast in Tamil Nadu. On June 30, while the Centre was preparing for the grand rollout of a taxation reform that would rid India of the menace of double taxation, lawmakers in Tamil Nadu did just the opposite. That evening, Tamil Nadu passed a local body tax of 30 per cent on cinema halls.

While one would believe that the result would be an immediate increase in ticket prices for consumers, that isn’t the case. Tamil Nadu, in fact, is the only state in the country where government decide the price cinema halls can charge. As per the last such decision, dated January 1, 2007, ticket prices have been capped in the range of Rs 30 for single screen non-AC theatres and Rs 120 for multiplexes in the state.

Its a fight for control, say industry insiders - one where the state government fears ceding ground to the Centre through the GST, which maintains the financial autonomy of local bodies, legally giving them a free hand to impose such taxes. The industry believes that through this tax, the Edappadi Palaniswami government believes it can arm-twist and drain cinema as per their whims and fancies.  

GST deals a blow to regional cinema, but Tamil Nadu may just have killed it

The Tax Math

The entertainment tax Tamil Nadu levied on theatres was 15 per cent before the state government’s latest decision, while Tamil films were largely tax-free. Starting June 30, the 30 per cent tax burden on theatre owners clubbed with the GST comes to a whopping 48 per cent for tickets priced below Rs 100 and 58 per cent for those priced above.

“The 30 per cent tax component imposed by the state government is on the ticket price, say Rs 120. With price caps in place, the additional 30 per cent burden also rests with the theatre owner,” national award-winning film producer, author and film distributor G Dhananjayan tells indiatvnews.com.

A back-of-the-envelope calculation of the taxes throws up some astounding figures.

Before GST/local body tax: In a scenario where the ticket price is Rs 120, until June 30, the revenue after tax for theatres came to Rs 120 per ticket since there was no tax levied on Tamil cinema. Assuming the share of producer or distributor at 50 per cent, the cinema hall would pocket Rs 60.

After GST/local body tax: For the same ticket priced at Rs 120, the tax outgo would come to 58 per cent (28 percent GST + 30 per cent local body tax), which is Rs 69.60, leaving the revenue after tax at Rs 50.40. Assuming the same share (50 per cent) for producers and distributors, the revenue share for the theatre owner come down to Rs 25.20.

The revenue share of the theatre per ticket comes down drastically from Rs 60 (prior to the local body tax and GST) to Rs 25.20 now.

‘Death of Tamil Cinema’

Theatre owners say the state’s decision to levy this additional 30 per cent tax poses questions on their very survival. “From theatre owners to producers to distributors, everyone is going to feel the impact. With the revenue share for theatres going down, how will they pay distributors and producers?” Abirami Ramanthan, president of the Tamil Nadu Cinema Theatre Owners Federation, told indiatvnews.com.

“Our objections are not to the GST but the manner the state government has gone ahead and imposed this additional tax. Four days ago, if I was pocketing Rs 100 for a ticket, starting Monday, my burden increases 58 per cent. With price caps in place for tickets, how does the government expect us to survive?” he says.

“The move by the state government to levy 30 per cent tax will mark the death of the Tamil film industry. The double taxation (GST + local body tax) entirely defeats the GST’s purpose of ‘One Nation One Tax’,” he added.

Dhananjayan is equally scathing in his attack on the state government. “You (GST Council) took one full year to decide GST rates from 5 per cent to 28 per cent. But it took you just one day to decide you are going to impose a 30 per cent tax on theatre owners, that too without any consultation with the industry. How is that fair?” he questions.

Perhaps the strongest criticism came from veteran actor from Tamil Nadu Kamal Haasan who faulted the government for deliberately making things difficult for filmmakers. Neighbouring states like Kerala have totally desisted from levying anymore state tax on cinema over and above GST, he points out, adding that Karnataka has gone even further to facilitate the wellbeing of the film Industry and Telangana and Andhra are also doing their best for their film industries.

“It is only Tamil Nadu government that has brought it to 30 per cent. Film making in this state has been made difficult deliberately. There are further tortures and systemic corruption that the film industry has to endure under this regime. All factions of the industry are agitated. I am trying my best as any sensible individual of the industry to maintain solidarity and not play into the hands of any self-serving and avaricious politician”, Haasan said, adding that the film industry is one among the many asphyxiated by the prevailing systemic corruption in the state.

Road Ahead

Ramanthan, however, says that the government has been listening. “First, they did not understand our problems, now at least they are listening. We are engaging with them but this strike will continue unless the government yields and rolls back the tax,” he added. “We have no option.”

Dhananjayan agrees with the assessment but refuses to call it an agitation of only theatre owners. The move by the state government, he says, affects every section of the film fraternity. “When other state governments are making efforts to help their respective industries, our government has gone ahead and done the unthinkable. Since the strike has begun, the protests are only going to get stronger. This move may just bring the entire industry to a grinding halt. More sections will join the protest,” he added.

The impasse appears unlikely to end anytime soon and it is difficult to put a timeframe to when the situation may ease. For the government too, going back will not be easy. For, the 30 per cent tax has come through the state Assembly, and revoking it will take time. While sources tell India TV that the government may be looking at stalling a resolution for now, the protests are only growing.

At stake are the 10-odd films released in the past two weeks and filmmakers are worried about the fate of their recently releases. Dhananjayan, however, feels that they will have to bite the bitter pill. “They will have to suffer. What can be done about it?” he said. Dhananjayan is the distributor of ‘Ivan Thanthiran’, a film that released on June 30, just three days ahead of the shutdown by theatres.

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