1. GST impact on entertainment: Theatre strike in Tamil Nadu shows it is time for state government to delink itself from industry

GST impact on entertainment: Theatre strike in Tamil Nadu shows it is time for state government to delink itself from industry

More than 1,100 theatres across Tamil Nadu remained shut on Monday. Theatre owners in the state have called for an indefinite strike to protest against the state’s imposition of 30% entertainment tax in addition to the 28% goods and services tax (GST) on film trade. I

By: | Published: July 6, 2017 6:22 AM
GST impact on entertainment, Theatre strike, Tamil Nadu, tamil nadu theater strike, article on tamil nadu theater strike The talks between the various parties involved have led nowhere on the first day of the strike.

More than 1,100 theatres across Tamil Nadu remained shut on Monday. Theatre owners in the state have called for an indefinite strike to protest against the state’s imposition of 30% entertainment tax in addition to the 28% goods and services tax (GST) on film trade. It was expected that this standoff would end soon. The talks between the various parties involved have led nowhere on the first day of the strike. Filmmakers who have borrowed heavily to release their films are wringing their hands. Although they are sympathetic to the theatre owners’ demand the Producer’s Council wants the strike called off.

Tamil Nadu is the only state in the country which has imposed this tax in addition to GST. Neighbouring Andhra Pradesh and Telangana which are equally film crazy haven’t. Nor has Kerala which is ruled by the left. From 1967, when the Dravida Munnetra Kazhagam (DMK) came to power, film industry and politics have been intertwined. Chief minister M Karunanidhi was a popular and successful screenwriter, and his successor MG Ramachandran was the superstar of that era. It was the rift between both which led to MGR leaving the DMK and launching the All India Anna Dravida Munnetra Kazhagam (AIADMK). It is said that Karunanidhi was trying to curb MGR’s ever increasing popularity by trying to block the release of his films. He brought in his son to take on MGR. Everybody in the industry knows about their legendary clashes, but nobody has been willing to talk about it.

Every chief minister starting from Karunanidhi to Jayalalithaa has retained cinema (information and publicity) under their portfolios. They have had a tight control over the industry. Stars and producers have had to pay obeisance to them. The chief ministers did not always do things to please the industry. One of the first things MGR did was to stop the morning shows in Tamil Nadu. He said these screenings would tempt children away from schools. The theatres traditionally had four screenings. This dealt a big blow to the industry at that time. Like many rules relating to the industry, this was openly flouted in many theatres. Although it still remains on paper, big budget films (such as Rajinikanth’s) sometimes start their screening early in the morning on the first day.

The Tamil film industry till recently operated only on cash. Even when cheques were issued, they often bounced. Stars took 50% of their payment in cash whatever was claimed otherwise. It is well-known that political slush money funded many films. Both the DMK and AIADMK have constantly meddled with the film industry. Many of Karunanidhi’s large family members are producers, distributors and now actors. As distributors, they have been accused of arm-twisting many theatre owners into screening their films. AIADMK’s Sasikala’s family was no better. They own multiplexes and fund films.

The entertainment tax history in Tamil Nadu is quite bizarre. When Karunanidhi came back to power in 2006, he introduced a 15% entertainment tax. He also announced a waiver of this tax when films had titles in Tamil. There has been a scramble for pure Tamil titles ever since. He also froze ticket prices. What costs `500 in other metros, costs only `120 in the state.

Jayalalithaa won the elections in 2011 and increased the tax to 30%. Three months later, she announced that films with U certificate will also be exempted from this tax. She then set up a committee of hand-picked people to view films and recommend them for tax exemption. This resulted in double censorship in the state. It is well-known that tax exemption became a notorious money making racket. You pay and get an exemption. When the stakes were high, the producer had to pay more. Karunanidhi’s grandson Udayanidhi Stalin’s films never got tax exemption.

The industry has been slowly moving towards bringing down black money transactions. Tamil films were funded 60% by cash. According to insiders, it has come down to 20%. Demonetisation brought about some changes. With the introduction of GST, it has become more difficult to deal with cash. The industry thought that entertainment tax menace will also be eliminated. But Tamil Nadu government thinks otherwise.

The theatre owners, particularly the multiplexes have survived the ticket price freeze because of higher footfalls compared to other states. They also have various concessions on food and drinks such as popcorn and bottled drinks. The multiplexes do well wherever there is a food court. There are multiplexes coming up in smaller towns. However, single screens continue to dominate accounting for 80% of the theatres.

The imposition of the 30% entertainment tax will affect the economics of various stakeholders in the industry. With the cap on ticket prices, the additional tax cannot be passed on to the customer. Paying this tax from the ticket money by the theatre owners will end up reducing the producers and distributors share quite a bit. The feeling in the industry is that time has come for the state government to de-link itself from the film industry. Technology has raced ahead. People watch films on computers, phones and tablets, and it no longer makes sense to control prices or impose a tax which has always led to corruption.

“The industry employs more than 10 lakh people. Nearly 200 films are made each year. A quick resolution will be good for everybody,” says Sreedhar Pillai, trade analyst and film critic. says Sreedhar Pillai, trade analyst and film critic.

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