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28 percent GST imposed on cinema.Aries Plex S L Cinemas/Facebook

With the Goods and Services Tax (GST) Council fixing the tax rate at 28 percent for cinema tickets, replacing the complex entertainment tax currently in place, the fortunes of the film industry, including multiplexes, are bound to swing both ways. In places such as Delhi and Maharashtra, movie buffs are poised to benefit while their counterparts in other regions stand to lose.

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The reason is simple: some states have as high as 100 percent entertainment tax while those, like Tamil Nadu and Andhra Pradesh, levy a lower rate of 20 percent. Further, many of the states have differential tax rates, one for regional films as an incentive and a higher rate for other films.

For instance, in Tamil Nadu, there is no entertainment tax rate on Tamil films while it is 15 percent for non-Tamil films. 

Similarly, in Andhra Pradesh, the tax rate for Telugu films is 15 percent and for non-Telugu films, 20 percent. Karnataka too has a dual-tax rate, zero for Kannada films and 30 percent for other films.

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In Maharashtra, the rate is 45 percent for non-Marathi films and zero for Marathi films.

The proposed 28 percent will do away with such distinction.No wonder then that the South Indian film industry feels disappointed, though some have a contrary view.

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Interior of Aries Plex SL Cinemas in ThiruvananthapuramPR Handout

"Ministry hasn't offered there will be any differential rate for Regional Films. Worst Hit- Telugu, Marathi & Kannada films. Boost to Hindi. On an average basis, Hindi/Eng films pay 37% Tax in India. Regional Films pay around 16%.

"GST Committee choose to ignore this difference. Instead of treating Regional Films separately Finance Ministry autocratically brought in all under one roof ignoring the market conditions. The 28% GST will maintain status quo on a National Level Tax Revenue basis but robs Regional films and is hugely beneficial to Bollywood," Andhra box office said in a series of tweets.

The views were echoed by producer G Sriniwasa Kumar. "Huge blow to #TeluguCinema & Regional cinema Entertainment tax is 12 to 15% earlier now 28% affects ticket rates & movie goers, So SAD," he tweeted.

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Trade analyst Sreedhar Pillai was not all that pessimistic in his assessment.

"Major issue of #GST in TN is that there will no longer be tax free films. So all with tax free certificates will try to release b4 June 30. There is a positive side to #GST 4 Kollywood directors, will get more creative freedom title in English. No compromises 2 get U certificate," he said.

Complex tax structure in Kerala

Though the entertainment tax will be replaced by the GST, movie buffs in the state could still end up paying exorbitant rates, according to a theatre-owner and filmmaker. "As of now, the service tax for tickets in corporation, municipality and panchayat will be 25%, 20% and 15% each apart from the entertainment tax. So from July 1, this will increase to 53%, 48% and 43%. This is going to affect the industry badly, and I request all the cinema organisations and movie biffs to react against this," B Unnikrishnan Pillai said.

He disagreed that the proposed GST will subsume the service tax currently being levied. "No, not in Kerala where ET is collected by the local bodies. ET in Kerala doesn't come under VAT and, therefore, doesn't get merged with GST," he said.