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Indian film business continues to struggle post GST

LiveMint logoLiveMint 31-07-2017 Lata Jha

New Delhi: It’s been more than two weeks since the Goods and Services Tax was introduced and film industries in both the northern and southern states are suffering, albeit for different reasons.

On one hand, the shutdown of about 1,060 screens in Tamil Nadu following the imposition of 30% local corporation tax in addition to GST, was followed by a near-halving of box office collections of local language films due to hike in ticket price, said independent trade analyst Sreedhar Pillai. Although Tamil Nadu, like other southern states, had a price cap, it was removed post GST.

“There was a ticket price increase of nearly 20-30% in Tamil Nadu,” Pillai said, adding that the situation for Tamil cinema is terrible at the moment. Gautham Karthik’s action comedy Ivan Thanthiran and action thriller Pandigai were most affected by the price hike, Pillai said. 

Tamil Nadu, Andhra Pradesh, Telangana, Karnataka and Kerala work with strict ticket price caps and no state government other than Tamil Nadu has allowed a price hike yet. So, in states other than Tamil Nadu, it is a double whammy for distributors and exhibitors, who have to pay higher tax for the same admission fee. 

To be sure, while in many cases local language films were exempted from tax before GST, Hindi and Hollywood movies were required to pay a standard rate—30% in Tamil Nadu and Karnataka, 15-20% in Andhra Pradesh and 25% in Kerala.

“Our industry is driven by the state. So, we have to wait for the state governments to take a call,” said Tarun Tandon, managing director at distribution company Indra Films, which works primarily in the Andhra Pradesh-Telangana region. “We are trying to get the government to allow price hike but in a way, the south Indian industry has remained strong only because of stagnant prices. So, we only want slightly higher prices because GST has impacted us so much.”

North India, meanwhile, has a different struggle. A couple of independent cinema owners increased their ticket rates by nearly 10-15% in Punjab. These local theatres in areas like Moga, Kotkapura, Sangrur and Dhuri, however, reported a box office drop of 20-30%, said Munish Sahni, director of production and distribution company Omjee Cineworld that works in Punjab.

“GST has been a huge dent on Punjabi cinema,” Sahni said. “If exhibitors do not increase their ticket rates, it impacts their business. If they do hike prices, it affects the audience. Rising ticket prices will have a direct impact on footfalls. And then survival of exhibitors will be tough.”

To be sure though, the flexibility to change prices is the biggest loophole in the Indian entertainment tax landscape, say industry experts.

“The idea that benefits of film tax exemption are being passed on to the customer is very notional. It exists on paper and in principle, but not in reality,” explained Utpal Acharya, founder of film production, distribution and marketing company Indian Film Studios, referring to instances where theatre owners are free to tweak and increase net ticket prices.

 “In Maharashtra, you’re still paying Rs400 for a movie on the weekends and Rs250 for weekdays. The overall benefit (of tax reduction or exemption) is not being passed on to the customer, at least for Hindi and Hollywood movies,” Acharya said.

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