GST in Cinema
Impact of GST rates on the entertainment industry
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So far , the VAT Regime was levied by states and the rates ranged from 0 to 110%, with an average of 30%.A list of the entertainment tax generally charged by states is attached .
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Buying Food at these Places:-
Most of these entertainment places (movie halls, amusement parks etc.) give out contracts to private players to supply food.
The service tax currently (pre-GST) is 15%, and the entertainment industry enjoys an abatement of 60% on service tax, i.e., only 40% of the 15% service tax has to be paid. So, the total tax under the VAT regime is,
VAT of 14.5 + service tax 6%= 20.5%
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Impact of GST Rates
The table attached shows the final rates that will apply to the entertainment industry post-July, 2017.
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For End Consumers
Earlier in movie theaters (multiplexes), food and beverages are taxed at a VAT of 20.5% and an average of 30% tax is levied on tickets, depending on the state as mentined above.
Under GST regime, Movie tickets will attract GST at 28%. As food and beverages fall under the supply of food/drinks in outdoor catering, they will attract 18%. Thus, we see that the GST rates for the entertainment industry are lower than the VAT and Service Tax.
For states with a high entertainment tax, GST will be beneficial as it will reduce the prices for the end consumers. However, GST will have a negative effect on states which already have a low entertainment tax.
As we see above, the GST impact on ticket prices will differ from state to state.
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For Entertainment Industry Owners
Like the end consumers, even the entertainment industry will see a varied impact of GST implementation. Movie theaters and amusement parks may see either a positive or a negative impact depending on the state they are in.
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Availability of ITC
ITC will now be available on the services component of activities like catering, renting of premises for movie halls, security costs which were not available under the pre-GST regime. So, the input GST paid when renting a premise can be adjusted with the output GST from selling tickets.
Thus, the tax burden on the owners of theaters, amusements parks etc. is set to reduce in the coming days.
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Additional Tax by Municipalities
Municipal bodies have so far not had any share in entertainment taxes collected by states. However, there are reports that some states such as Madhya Pradesh, Rajasthan, and Gujarat which might ask their local bodies to charge entertainment tax. If local taxes become applicable, then the operating margins and profits, as calculated above, will be affected.
Thus impact of GST on the entertainment industry can be both positive and negative, depending on the State. Owners of movie halls, parks etc. stand to gain under GST thanks to the provision of input tax credit. However, the effect of any additional local taxes (if levied) needs to be taken into account.
-------------------------------------------------------------------------
So far , the VAT Regime was levied by states and the rates ranged from 0 to 110%, with an average of 30%.A list of the entertainment tax generally charged by states is attached .
-------------------------------------------------------
Buying Food at these Places:-
Most of these entertainment places (movie halls, amusement parks etc.) give out contracts to private players to supply food.
The service tax currently (pre-GST) is 15%, and the entertainment industry enjoys an abatement of 60% on service tax, i.e., only 40% of the 15% service tax has to be paid. So, the total tax under the VAT regime is,
VAT of 14.5 + service tax 6%= 20.5%
--------------------------------------------------------------------------------
Impact of GST Rates
The table attached shows the final rates that will apply to the entertainment industry post-July, 2017.
-----------------------------------------------------------------------
For End Consumers
Earlier in movie theaters (multiplexes), food and beverages are taxed at a VAT of 20.5% and an average of 30% tax is levied on tickets, depending on the state as mentined above.
Under GST regime, Movie tickets will attract GST at 28%. As food and beverages fall under the supply of food/drinks in outdoor catering, they will attract 18%. Thus, we see that the GST rates for the entertainment industry are lower than the VAT and Service Tax.
For states with a high entertainment tax, GST will be beneficial as it will reduce the prices for the end consumers. However, GST will have a negative effect on states which already have a low entertainment tax.
As we see above, the GST impact on ticket prices will differ from state to state.
-----------------------------------------------------------------
For Entertainment Industry Owners
Like the end consumers, even the entertainment industry will see a varied impact of GST implementation. Movie theaters and amusement parks may see either a positive or a negative impact depending on the state they are in.
---------------------------------------------------------------------
Availability of ITC
ITC will now be available on the services component of activities like catering, renting of premises for movie halls, security costs which were not available under the pre-GST regime. So, the input GST paid when renting a premise can be adjusted with the output GST from selling tickets.
Thus, the tax burden on the owners of theaters, amusements parks etc. is set to reduce in the coming days.
-------------------------------------------------------------------------
Additional Tax by Municipalities
Municipal bodies have so far not had any share in entertainment taxes collected by states. However, there are reports that some states such as Madhya Pradesh, Rajasthan, and Gujarat which might ask their local bodies to charge entertainment tax. If local taxes become applicable, then the operating margins and profits, as calculated above, will be affected.
Thus impact of GST on the entertainment industry can be both positive and negative, depending on the State. Owners of movie halls, parks etc. stand to gain under GST thanks to the provision of input tax credit. However, the effect of any additional local taxes (if levied) needs to be taken into account.
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Oct 31
As far as my information as well as understanding goes, the VAT also had provision of input tax credit as the tax was only on value added at each stage. I also do not think that States will not exercise their powers of levying additional taxes through municipal bodies. May be it is too premature to assess whether there will be fall in prices or increase in prices as the main example is your home delivery orders of food products have gone up by 4% as there was no service tax applicable for home delivery orders.
Jul 25
Movie tickets rates and food stuff charges in theaters are very high.This has to be reduced.
Jul 24
It appears that you have not read the constitutional amendments carried out along with GST. Local Bodies have been given power to levy tax on entertainments in addition to GST. The gap will be covered by such tax.
Jul 24
The only way is not to go to movies, particularly in my home state.
Jul 24
