High taxes, low success rate bleeds film industry

Besides 45% entertainment tax, there are a number of other taxes


Geetanjali Minhas | February 10, 2012

Tired of different taxes, the Film Federation of India has called  for a nationwide strike on February 23. Multiplexes, single screen cinema’s and all production work will come to halt in protest against the government's proposed 10.3 percent service tax on the film industry.

The film industry pays highest tax in the country but only 7 percent movies are successful and 97 percent are flops, say industry sources. Maharashtra pays highest number of taxes while in some states taxes have been abolished. Besides 45% entertainment tax, there are a number of municipal taxes, including  property tax, water tax, show tax, Indian news reel hire charges, annual licence fees, PWD and electrical tax, hoarding tax, advertisement tax, VAT etc. Now the government wants to levy 10.3% service tax. The film industry has to compete with television, internet and mobile entertainment, too, say sources.

“When a film does good business, distributors, producers and exhibitors do benefit but for a small period. How will cinema owners survive for the next 52 weeks? It is a dying industry” says Ram V Vidhani, vice president of Film Federation of India, president of Cinema Owners and  Exhibitors Association in Mumbai  and chairman of Excelsior Cinema in Mumbai. A successful film does good business on three days, Friday, Saturday and Sunday.

Vidhani says that increasing ticket rate will reduce occupancy rates. At present it is only 15-20% in single screens. Many theatres are on the verge of closing.

He said as per UNO norms and considering our population, we should have 1 lakh screens in the country . Earlier there were 13,500 single screens but now there are only 10,561 screens in the country. In Maharashtra where there were 1,080 single screens only 610 have remained. In a multiplex with five screens, 1-2 remain closed and the fixed cost remains unchanged.

While the producer will collect taxes from distributor who will collect the same from exhibitor, as per law, the exhibitor cannot pass on these taxes to consumers. To make matters worse in Mumbai, laws bars cinema owners to switch over to other business.” If ones child wants to become a solicitor or an engineer, of what use the theater be to that person?

Insiders say over the years several letters have been written to the government pleading tax reduction. Film industry is hurt and the issue will snowball into a big problem in future. “The industry keeps crying, talking to the government, meetings are held, statements are issued by the government but eventually nothing comes out of it. Government gets highest taxes from the industry, yet it has never valued it but  when it needs our people to do their bit during elections, flood or other things of importance, our people have always supported them," says Sushma Shiromanee, ex-vice president, Indian Motion Picture  Producers’  Association.

TP Aggarwal, president, Film Federation of India said, “The strike is called to oppose the proposed Service Tax and Copyright Act which the government intends to bring in. By the time a film releases, the producer is already under heavy service tax. Any additional tax will burden them further.”

Distributer and Exhibitor, Ramesh Sippy explained that the entertainment industry as a head covers television and others. While these are flourishing with profitability rate of 60-80 percent, the rate of succes in the film industry is not even 5 percent. It is the cinema part of it which is being taxed. “By imposing these taxes, industry will die a natural death. 10.3 percent is the highest slab when the govt had the option to consider a lower tax percentage. This is not liquor or tobacco. Can you discourage people from entertaining themselves," asked Sippy.

“There is no service tax on telecast of television shows on channels. It is a token strike but if the government continues to ignore and sideline it, they will consider an indefinite strike,” he added.




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