The Multiplex Association of India (MAI) has urged the Karnataka government to reconsider its decision to impose a 2% cess on cinema tickets, warning that the levy could increase costs for consumers and create a cascading tax burden for the theatrical exhibition industry. The body is also exploring all possible options to challenge the levy.
The move follows a September 10 gazette notification under which provisions of the Karnataka Cine and Cultural Activities Welfare Act will come into force from September 30, bringing the cess into effect.
The notification was issued on the same day the Karnataka High Court quashed notices issued by the Labour Commissioner seeking payment of the 2% cess. According to MAI president Kamal Gianchandani, the court had set aside the notices on the ground that the legislation had not yet been notified.
“The High Court issued a clear order quashing all those notices. But then the government notified the Act and then issued a fresh date saying that from 30th September, the 2% cess will be applicable,” Gianchandani said.
MAI has raised concerns over the impact of the levy on ticket prices as well as its treatment under the goods and services tax (GST) regime. Experts said an average cinema ticket priced at around Rs 300 would attract an additional Rs 6 as cess.
The association also contends that GST would be payable on the cess, while input tax credit would not be available against it, resulting in what it described as a tax-on-tax effect.
“This is something which is against the objective of GST, which was to remove cascading taxes,” Gianchandani said.
Karnataka would be the first state government in India to impose a state-level cess on cinema tickets, according to MAI. Gianchandani said some local bodies in Kerala levy cess on movie tickets, but distinguished those charges from a levy imposed by a state government.
The cess will apply to both multiplexes and single-screen cinemas in Karnataka.
MAI also said the levy comes at a time when theatrical exhibition is recovering from the disruption caused by the Covid-19 pandemic. “This is, in fact, the first year when industry is seeing a revival of theatrical footfall,” Gianchandani said.
MAI represents more than 11 cinema chains operating over 550 multiplexes and about 3,000 screens. The association said it remains willing to engage with the Karnataka government and other stakeholders on measures to support cultural and creative workers without adding to the cost of cinema-going.