from 5 October, 2018, to protest against the double taxation on cinema tickets in Madhya Pradesh
In response to a notification issued by the Bhopal and Indore Municipal Corporations, levying Local Body Entertainment Tax on all films, of upto 15% in Bhopal and 5% in Indore, in addition to the already prohibitive 28% Goods and Services Tax on cinema tickets, all members of Multiplex Association of India (MAI), have announced discontinuance of operations in Madhya Pradesh in a strike starting from 5 October, 2018. The MAI understands that single screen cinema theatres will also be joining in this strike, and producers and distributors will also be withdrawing all content from all cinema theaters from today.
Under the erstwhile indirect taxes regime, State Governments were levying an entertainment tax on exhibition of films in cinema theatres, including multiplexes. With the advent of Goods and Services Tax (“GST”), entertainment tax levied by State Governments was subsumed in GST, and hence, State Governments stopped charging entertainment tax on cinema tickets, since these were subject to GST. However, the State of Madhya Pradesh empowered local bodies within Madhya Pradesh to start levying entertainment tax, in addition to GST, and in pursuance thereof, the Bhopal and Indore Municipal Corporations have notified all cinema houses to register themselves and pay the accumulated dues from July 2018, till date, at 5% on all tickets sold in Indore and upto 15% in Bhopal.
MAI believes that this levy of local body entertainment tax (“LBET”) by Bhopal and Indore Corporations leads to double taxation, on an industry which is already reeling under the impact of high tax rates and piracy, and could well sound the death knell of the film industry. Therefore, MAI requests the concerned regulatory authorities that such levy of LBET should be rolled back immediately. All multiplexes operating in Madhya Pradesh, in a protest against this punitive and unfair double taxation, will go on strike with effect from 5 October, 2018. As stated, the MAI is given to understand that single screen cinema theatres will also be joining in this strike, and producers and distributors will also be withdrawing all content from all cinema theaters from today.
MAI has time and again pointed out before various regulatory bodies that the levy of LBET, in addition to GST, goes against all the tenets of the GST regime:
o Significantly increases the tax cost for cinema exhibition, and pushes up the price of cinema tickets, and hence is inflationary
o Goes against the principle of “One Nation, One Tax” and frustrates the GST model, leading to the same problems that have plagued industry so far – multiplicity of very high tax incidence
o Results in cascading of taxes, since such levy will be added to the transaction value (ticket price that a patron pays), and GST will be levied thereon. In essence, such LBET re-ushers the unfortunate position of tax on tax, which was to be done away with under GST regime
o Not being creditable, is contrary to the main principle of GST – one fungible indirect tax across the entire value chain
o Distorts the principle of equivalence, since under the erstwhile indirect taxes regime the local bodies, etc. were generally not charging or levying such an entertainment tax
Mr Deepak Asher, President of the Multiplex Association of India said “We most humbly and respectfully appeal to the Honorable Chief Minister of Madhya Pradesh Shri Shivraj Singh Chouhan and the Commissioners of Bhopal and Indore Municipal Corporation Shri Avinash Lavania and Shri Ashish Singh to kindly consider our request favorably and withdraw the LBET levied on the film exhibition industry in Bhopal and Indore immediately, and with retrospective effect from the date it was levied. We believe such withdrawal will ensure the survival of the film industry, and will support an environment of safe, secure and wholesome entertainment option for the population of Madhya Pradesh. On the other hand, continuance of an LBET, in addition to GST, will render cinema exhibition unviable, and will eventually kill the film industry, not only causing significant losses to the film exhibition industry, but also to the film distribution and film production sectors, and most importantly, will deprive the population of Madhya Pradesh of clean, safe and wholesome entertainment avenues.”