CHENNAI: Goods and services tax (GST) could change the dynamics of the entertainment sector. For one, the new tax regime could bring in certain discipline to the sector as it will offer the much-needed uniformity in taxes. Two, it could also bring down costs to some extent.
Currently, the sector pays taxes at multiple levels but is unable to recover taxes paid on input costs. This will change under the new regime where input tax credit will be available.
In the present system, expense-related taxes incurred by film producers such as service tax charged by actors and make-up artists, tax paid on film sets, and by distributors (tax paid on marketing, office rentals etc) are treated as cost as these are not fully recoverable, explains Priyajit Ghosh, partner – indirect tax, KPMG.
“With GST, everything will become taxable and tax paid on expenses would be recoverable.” For example, the tax paid on AV equipment, theatre furniture and services etc would be available for input tax credit under GST, Ghosh adds.
GST could make things easier for film producers, says S Sundar Das, writer and film critic. “The positive side is that producers will no longer have to pay huge taxes in the form of service tax for theatrical, satellite and digital rights. Now all comes under one umbrella.”
The impact of GST will be equal for both big and small producers, says Frank D’souza, partner and leader, entertainment & media, PwC India. According to him, it will take about 18 months before the full impact of GST is known.
The impact needs to be considered in the context of the tectonic changes that are sweeping the industry at every level – Netflix, VOD, virtual reality, augmented reality, etc, says Suuresh Ramachandran, founder, CEO & CCO, Eye-Q Films. “GST will have a ‘functional’ impact on the media and entertainment industry – that is, give or take a few conveniences/ inconveniences.”
When it comes to the pain points, small-time producers may find it difficult to operate under the GST regime, says Das, as “GST will penetrate into all strata of the production procedure”. According to him, moviegoers will suffer because “ticket charges will increase considerably, especially in multiplexes”.
The GST Council recently decided to slash the rate for cinema tickets priced under Rs 100 to 18 per cent from 28 per cent fixed earlier. While this is seen as largely positive for the industry, a section of the industry has demanded more concession.
D’souza says more concession is unlikely immediately as the government would want to wait for the full impact of the GST rollout on various sectors.
How states respond to GST will also matter. The GST law has retained the power of municipal bodies to levy tax. Some states like Madhya Pradesh have already indicated they might levy additional entertainment tax through local bodies, others like Kerala have come forward to help the industry by making some reduction on their part.