Budget 2016 should rationalise entertainment tax, exempt newsprint from VAT and end double taxation on temporary transfer of movie rights to television channels, experts said.

“Currently, entertainment industry players such as DTH and cable service operators are reeling under the heavy burden of multiple taxation and levies such as licence fee and service tax.

“Moreover, high entertainment tax and lack of uniformity in tax rates across states are adding to the burden of the industry players,” Care Ratings said in a pre-Budget note.

The report noted that the entertainment tax at present ranges from 30 per cent to an astronomical 70 per cent across states. It has called for a uniform, simplified and single-point taxation across product categories under the purview of GST.

The government had originally planned to roll out GST from April 2016.

But the Bill is stuck in the Rajya Sabha, where the government does not have enough numbers, as the Congress is opposed to three clauses in the proposed law.

The temporary transfer of rights to television channels for telecasting movies attracts both VAT and service tax.

“This anomaly of double taxation needs to be resolved, pending roll-out of GST,” Deloitte Haskins and Sells partner Ashesh Jani said in a note.

With production and logistics cost increasing, he said, “there is a logical demand of exempting newsprint from VAT.”

Speaking about the television segment, Jani said: “Broadcasters pay band placement fees to cable operators or multi-system operators for placement of their channels on a preferred band to enhance viewership.”

There needs to be a clarity on whether band placement fees are in the nature of royalty or fees for technical services for the purposes of TDS.

As per industry estimates, there are around 9,000 cinema screens in the country, of which multiplexes account for about 25 per cent.

Screen density is only 7 per million, against 125 per million in the US.

“A five-year tax holiday should be granted to new screens similar to the provisions of Section 80-IB of the Income-Tax Act,” Jani said.

He further said government should set up media cities, through which various facilities and benefits can be granted to the industry.

“This practice is prevalent in many countries. Incentives to set up amusement and theme parks based on popular films and various aspects of entertainment world such as gaming, animation should be given,” he said.

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