Tax slab: Southern film industries may stall movie-making process


BENGALURU: With their demand for the lowest slab under Goods and Service Tax (GST) being met only partially, southern film industries have decided to intensify their battle. Members of the Kannada film fraternity, which is at the forefront of the stir, said they are planning to stall filmmaking activities to pressure the Centre to yield.

“The GST rates and the new taxation policy will test the very survival of regional film industries. We are left with no option but to put up an aggressive fight,” said Sa Ra Govindu, president, Karnataka Film Chamber of Commerce. “While industries of all the southern states have come together for the cause, we will examine involving other regional film industries in our agitation. We will decide whether the strike should be indefinite,” added Govindu.

While many regional film industries, including Kannada and Malayalam, enjoy tax-free benefits from their respective governments, the southern film fraternity has been demanding that regional movies be put under the lowest slab of 5% under GST. The GST Council had earlier classified films under the highest slab of 28%. However, the council meet on Sunday fixed a rate of 18% on films if tickets are priced less than Rs 100 and retained 28% for tickets above Rs100.

The council has allowed state governments to refund their part of the GST component through direct benefit transfer (DBT) scheme. “We are partially happy with the revised tax rates. However, the devil is in the detail. The rules and the new taxation policy in itself is detrimental to regional film industries,” said S R Prabhu, treasurer, Tamil Film Producers’ Council.

For instance, the Tamil Nadu government has capped ticket prices at Rs 35 and the new GST tax rates would not have much impact on the trade. But there are other facets of GST, which has sought to bring various services involved in filmmaking under the tax net.

Industry insiders say a producer will have to bear 18% GST towards various services he has availed during the making of the film. This burden will be repaid to the producer when he mandatorily claims the tax input credit within one year of the first transaction of the film’s making. This rule, according to insiders, indirectly mandates that the film should be completed within a year. “It takes more than a year for a producer to get returns on his investment,” explained Prabhu.

According to his rough estimation, a producer investing Rs 1 crore in a film would lose at least Rs 18 lakh as he would pay at least 18% at every step from the launch of the film while sourcing various goods and services. “We hope the Centre will rectify the lacunae in the tax rules. If not, we will launch a widespread agitation,” said Prabhu. He demanded that the government do away with the capping of ticket prices and put in place flexible rates.

Vivek Mallya, a taxation expert, said, “With the proposed GST structure, the film trade is going to be unviable.”



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