Kerala government has decided to go the Tamil Nadu way by imposing an entertainment tax, but insiders say that the additional tax will be a big blow to the industry.

Movie tickets to get costlier in Kerala FEFKA says unhappy with new entertainment taxImage for representation only
news Tax Thursday, January 31, 2019 - 16:09

Movie lovers in Kerala will have to cough up more to watch a film in a theatre. This after the state government announced a 10% ‘entertainment’ tax on tickets. With this additional tax, the price of each ticket will rise between Rs 10 and 25.  

Termed the Local Body Entertainment tax (LBET), this tax will be collected by local administrative bodies -  Corporations, Municipalities and Panchayats - and will be levied in addition to the current 18 % GST on tickets. 

Announcing the decision during the Kerala Budget on Thursday, Finance Minister Thomas Isaac said that the government followed Tamil Nadu which levies both an ‘entertainment’ tax and GST and decided to do the same. 

“Prior to GST, entertainment tax in Kerala was collected by local bodies. After GST, the government decided to do away with local body tax to avoid double taxation. But then the GST was slashed from 28% to 18% and many states such as Tamil Nadu are imposing double tax. Therefore, we have now decided to allow local bodies to collect this 10% entertainment tax,” explained Thomas Isaac. 

How this will affect the film industry 

Speaking to TNM, B Unnikrishnan, general secretary of Film Employees Federation of Kerala (FEFKA) said that the new tax was a big blow to the industry as now the footfall in cinema halls will reduce drastically. 

“In the past one year, there has been a 35% increase in the number of screens in the state. This means that the footfall is divided between these screens and the aggregated occupancy levels of screens has dipped by 8 to 10%. When the GST was slashed from 28 %to 18% last year, we saw an immediate increase of occupancy levels in these screens by 4%. Now this will dip again drastically if an additional ‘entertainment’ tax is levied,” Unnikrishnan said.

Unnikrishnan said that apart from the obvious losses the film industry will face, double taxation also is in conflict with the law.

“You cannot impose two separate tariffs on the same product. This is absolutely not tenable,” he said. 

Prior to the implementation of GST, local bodies in Kerala used to collect an 'entertainment' tax on tickets. 

"In big cities municipal corporations collected 22 %. In smaller towns, municipalities taxed 18 % and village panchayats levied 12 % tax. But when GST was introduced, the government did away with this tax," he said. 

With GST, a blanket slab of 28% tax was levied on tickets above Rs 100 and 18% on tickets below Rs 100. As a result, ticket fares soared and footfall in cinema halls took a hit. 

In 2018, the Central government decided to slash GST slabs effective from January 1, 2019. Taxes on movie tickets went down from 28% to 18%, which immediately reflected in the cinema hall occupancy rates, Unnikrishnan observed. 

“The Kerala government, especially Finance Minister Thomas Isaac was very helpful in getting the GST rates slashed. He had even said that the government will not introduce a double tax and that they will pay local bodies from the 50% of the GST share that the state government gets. But now, in this new budget, things have changed,” Unnikrishnan said. 

Who will be affected most 

According to industry experts, small budget films and independent filmmakers including young and alternative film makers will get hit the worst. 

“Big movies always have an audience. With the increase in ticket price, people will be reluctant to go to films and instead, spend their money on big films to make the most of it. This is the general trend,” Unnikrishnan said. 

Further, with movie goers not being able to watch smaller films, piracy and other illegal means of watching films will also be on the rise. 

Film industry representatives are all set to discuss the new tax with the government. 

“We have already spoken to Minister AK Balan and CPI(M) state secretary Kodiyeri Balakrishnan. The industry representatives are holding a meeting with Isaac and Chief Minister Pinarayi Vijayan today,” he said. 

Become a TNM Member for just Rs 999!

You can also support us with a one-time payment.

Rs 200Rs 500Rs 1500Custom