Dual Goods and Services Tax (GST) slab, high taxes and little government support has been worrying Indian exhibitors who now seek rationalisation in taxes on movie tickets to power screen expansion.
With box office recovery underway, the multiplex industry is seeking policy push to make India a 20,000-screen market.
India has a headroom to grow to at least 20,000 screens and if the government comes out with GST rationalization, which is aggressive, which is favorable to the industry, India will get to this target over the next seven to eight years, President, Multiplex Association of India (MAI) said.
Multiplex proposal
What’s the exhibitors’ proposal? A 5 percent GST on movie tickets priced up to Rs 300.
“Our request to the government is that now because we are doing GST reform, the Prime Minister has spoken about rationalising GST rates to improve the affordability across the country, this is a fantastic opportunity to revise the GST rates. Come out with a new GST tax structure for movie tickets, which is, anything up to Rs 300 should attract 5 percent GST, and anything which is higher than Rs 300 can attract 18 percent GST,” the MAI head said.
He added that the rationale for the demand they are making is because there has been inflation over the last seven and a half years along with the impact of Covid, which led to change in cinema consumption.
Under the current tax regime, GST on cinema tickets is 12 percent for movie tickets priced up to Rs 100 and 18 percent above Rs 100, which came into effect in 2018.
“While one rate is always simpler, we (PVR INOX) could handle the complexity because we are a large listed entity. We have the resources to handle the dual GST structure. But the impact of this dual tax structure has been that bulk of our tickets qualify for the 18 percent GST. The Rs 100 GST slab is impractical. Even in 2018, we had requested the then Finance Minister Arun Jaitley to look at a higher number because Rs 100 was impractical in 2018.”
Lower taxes, more screens
With theatres yet to see full recovery from the pandemic impact, he said that lower GST will boost footfalls and screen growth in the country.
The total screens in India is around 9,000 with almost 5,500 screens still situated in the South of India, in the states like Telangana, Andhra, Kerala, Tamil Nadu, Karnataka.
“With lower taxes there will be a lot of acceleration of growth especially in smaller towns because the benefits will get passed on to customers. Ticket prices will come down with customers seeing a benefit of around Rs 40 per ticket. So, Rs 150-160 for a family of four which is a big number for Tier I, II cities. Whenever we run a promotion where we are offering a discount of Rs 20-25 rupees, we see a lot of traction. We see more tickets being sold every time we reduce prices,” he added.
India has one of the most expensive tax structures on movie tickets while countries like China operate at sub-10 percent tax on movie tickets.
The MAI President also said that the incumbent players will increase their scale and activate their growth rate because they will see action on the ground, they will see the impact of the Prime Minister’s vision. “They will then move forward with a lot of confidence and conviction. Right now, there has not been enough support from the government and the industry is lacking in confidence because of Covid impact. With this move, the government can infuse a lot of confidence in the industry.”
In the post-Covid period, multiplexes have been adding around 200-250 screens annually, down from 300-350 screens in the pre-pandemic period. Top players like PVR INOX have been adding around 100 screens however, they also have been shutting down some non-performing screens. Many single screen exhibitors have shut shop due to the Covid impact and changing movie consumption patterns, rise of streaming consumption and shift to short-form content consumption.
India continues to remain under-screened with only 8 screens per million population.
“We keep talking in every forum, every political discussion, every economic discussion, about the low penetration of cinema screens in India. This is a brilliant opportunity to give an impetus to this industry, make cinemas more affordable, give opportunities to new operators to come into the business and set up cinemas.”
He recalled the time when entertainment was levied on movie tickets. “In the 1995-97 era of entertainment tax when each state had a different E-tax structure, Maharashtra and Gujarat and various other states had come out with E-tax holiday to give impetus to the growth of cinema screens in their state and that is what created the multiplex revolution in the country. The E-tax holiday gave impetus to players like Fame, PVR, INOX and all of these players made rapid strides to grow the business because of the E-tax holiday offered by the states.”
While the E-tax holiday came to an end after 4-5 years, the industry kept moving because of the tailwind, he added.
