Cinema Halls Shut Across TN: But Can We Really Blame the Owners?

Tamil Nadu has cleverly circumvented the GST and continues to levy an entertainment tax. How did they pull it off?

Moviegoers in Tamil Nadu aren’t happy. Over a thousand movie theatres in the state, including both multiplexes and single screens, have pulled down their shutters since the Goods and Services Tax (GST) regime came into force on 1 July.

But wait, are the cinema hall owners angry with the GST?

Not exactly.

Here’s what they are upset about. Taxes up to 58% on movie tickets, in a state where the current price cap for a ticket is Rs 120. Yep, you read that right.

58% Tax on Movie Tickets! Wait, What?

So how did we get to this point?

Across the country, 18% GST is applicable on movie tickets below Rs 100. For tickets costing more than a hundred rupees, however, GST is at 28%.

In May this year, Finance Minister Arun Jaitley had said that the GST would subsume the prevalent entertainment and service taxes and replace it with a single tax.

But that hasn’t exactly happened. Tamil Nadu has cleverly managed to circumvent the GST and continue to levy an entertainment tax.

Here’s how – the state replaced the Tamil Nadu Entertainment Tax Act, 1939, with the Tamil Nadu Local Bodies Entertainment Tax Act, 2017.

“The tax rates remain unchanged at 30%. The companies which were earlier paying tax to the commercial taxes department, will start paying them to the respective local bodies from 1 July”, a senior Greater Chennai Corporation (GCC) official told The New Indian Express.

So what’s the trick you’re missing?

The GST provisions allow local body taxes to be levied above and beyond the GST. Voila!

And here’s what that means for movie theatre owners in Tamil Nadu.

For movie tickets under Rs 100:

And for tickets above Rs 100:

And if you thought a 58% tax was harsh on the movie owners, wait till you hear this.

For years now, the state government has capped movie ticket prices in Tamil Nadu to a maximum of Rs 120. No cinema hall in the state can charge you a single paisa more for a ticket.

That means if the tickets don’t get more expensive for you, the halls just make lesser money. And the costs of running and maintaining the hall aren’t going down either.

So can you really blame Tamil Nadu’s movie theatre owners for going on strike and cancelling all shows till the local body tax of 30% is revoked?

Industry Backs Theatre Owners, but Will Govt Oblige?

Tamil Nadu's Film Exhibitors Association has demanded that the government allow them to hike prices of movie tickets "reasonably".

Lyricist and writer Madhan Karky tweeted expressing solidarity.

Until the revision, I am willing to reduce 15% off my remuneration for songs and dialogues, if that would help the industry.

— Madhan Karky (@madhankarky) July 3, 2017

The whole industry is gathering together and we shall speak in one voice

Kamal Haasan 

These new exorbitant tax rates are akin to axing Tamil Nadu’s film industry. It is difficult to run theatres with such tax structures. Let alone independent films or low budget films, even big budget films and their exhibitors will have to bear the brunt. Thus, the current demands by theatre owners/associations for a roll back of the municipal tax and for bringing regional films/film industries to a lower tax slab is a valid and justified one. 

Chennai-based writer and director Biswanath Rath

Will the Tamil Nadu government give in to the demands to revoke the local body tax? Or will it considerably lift the cap for movie ticket prices? Or neither?

Picture abhi baaki hai, mere dost.

(What’s your take on the tax woes of theatre owners in Tamil Nadu? Comment below and let us know.)