Kerala has decided to scrap entertainment tax in order to avoid the potential hazard of double taxation once GST comes into force on July 1.
The decision was announced at a meeting Finance Minister Thomas Isaac had with representatives of the film fraternity here yesterday.
Local bodies in the State currently levy a 25 per cent entertainment tax on cinema tickets.
The film industry’s apprehension was that the government could go on to tax 28 per cent under GST in addition to the entertainment tax.
Its representatives voiced the fear that this would eventually lead to an increase in ticket cost and that would affect the turnout in cinemas.
The Malayalam film industry has an approximate annual turnover of about ₹500 crore, and provides 50,000 direct and indirect employment.
On an average, 130 films are being produced year at a cost of ₹4 crore per production.
The State has 550 cinemas and the average viewer turnout per show has been pegged at 400 and the per day viewership at two lakh.
GST Council meet
The Finance Minister said that a final decision on the tax rate to be levied from cinemas is to finalised at the GST Council meeting on June 11.
Once the State Government decides to go away with entertainment tax, it would be included in the terms of reference of the next State Finance Commission.
It would also be made part of the mandatory fiscal devolution to local bodies to make amends for the income loss incurred by the local bodies.
On implementing the GST, the direct local bodies would be directed not to collect entertainment tax on cinema tickets. Their loss in that score would be compensated by the State Government.
Welcome step
Actors Dileep and Innocent, who led the industry delegation, reminded the Finance Minister of the threat from pirated videos and surge in production costs.
These are already eating into the returns of producers and a steep hike in ticket could affect the flow cinegoers to theatres. The younger ones would be prompted to seek other options, mainly videos.
Meanwhile, Kerala Film Producers Association president G Suresh Kumar described the State Government’s assurance on the tax front as a welcome step.
“The decision has come as a great relief to the industry. It is looking forward to the GST Council arriving at a tax rate that would be affordable to all.”