The film industry was bleeding with various levels of cascading and dual taxation with very limited options to take credit of the input taxes. Almost 50-60 per cent of the ticket price was going towards paying Entertainment Tax, Service Tax, VAT, etc, eating into the margin of the producers/studios.
Reduced margins keep the hands of producers tied, which in turn results in restricting creativity. With Hollywood breathing down the neck of Bollywood films, it is important that every rupee of the budget goes into visual content.
With the advent of GST by next year, the industry not only hopes the effective tax rate and cost will rationalise but also expects ticket prices to come down, resulting in more footfalls in cinema halls too.
Another aspect is the high withholding tax rate on hiring of professional talents and equipment from overseas. Since these talents want their payment net of any taxes, the tax burden shifts to the producers, adding to their woes.
Over time, most Banks/NBFCs have become reluctant to finance individuals and smaller producers due to NPA issues and some financed films not seeing the light of the day. Only some corporate/large production houses which have a good track record in loan servicing have enjoyed the trust of banks. Others have to depend on unstructured loan sharks to bail them out at high cost, which eats into their budget.
Lately, various international film funds have shown interest in Bollywood films and are prepared to invest but they expect Bollywood to adopt international standards and transparency in their functioning, such as Production and E&O insurance, completion guarantee bonds, bound screenplay, detailed transparent budgets, etc.
c) Tax Rebate
Last year saw many new countries eyeing the Indian film business by providing various tax incentives. Malaysia, Georgia, Canada, Mauritius, Hungary, Bulgaria and Fiji have emerged as a new tax-incentive hotbed. This is over and above tried and test countries such as the UK and the US, and they together are taking away business from the Indian market.
I don’t think there is an issue in getting finance from banks. One should be credible enough to get the loan to make a film. Obviously when you apply for a loan, the bank checks your company’s balance sheet, track record and assesses whether your company will be able to repay the loan. So they check the producer’s credibility. I have never encountered any problems securing bank finance for my films.