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The Lords Giveth And The Lords Taketh Away

Last Friday (February 1, 2019), during the presentation of the Interim Budget, we were delighted to hear Union Finance Minister Piyush Goyal say, “Entertainment industry is a major employment generator. To promote entertainment industry - single window clearance for ease of shooting films, available only to foreigners, is now going to be made available to Indian filmmakers as well. Regulatory provisions will rely more on self-declaration. We will also introduce anti-camcording provisions in the Cinematograph Act to control the menace of piracy.”

Film piracy, both in its physical as well as online manifestations, is one of our most devastating and ubiquitous threats and we welcome the suggested amendments to the Cinematograph Act, 1952, whereby persons proven guilty of camcorder piracy shall be liable for a fine of up to Rs 10 lakh and/or imprisonment of up to a period of three years.

Similarly, any respite we can get in the daunting and red-tape riddled task of shooting films in our country is much appreciated. As often pointed out, it is a sad irony that the Indian film industry is courted by foreign governments and film commissions from all across the world who not only roll out the red carpet for us but also offer attractive financial incentives to make films in their regions, but filming in our own backyard is a costly and energy sapping affair requiring multiple clearances and permissions.

While time will tell how effective these initiatives prove to be, the film industry is so used to be totally ignored in successive Budget speeches that just the fact that our existence and concerns were even acknowledged in this important parliamentary statement is very heartening indeed.

This latest positive development follows a flurry of rare outreach to the film industry by the highest levels of government in the last few months. 

Since October 2018, Prime Minister Narendra Modi has had a series of high-profile interactions with various members of the film fraternity and to the credit of the government and the Prime Minister, these meetings haven’t been relegated to mere expressions of good intentions or the sharing of ‘selfies’ on social media platforms.

Almost immediately after one such December 18, 2018 meeting between the PM and a film industry delegation, the GST Council announced a reduction in GST rates from 28 per cent to 18 per cent for film tickets priced above `100 and from 18 per cent to 12 per cent for the sub-`100 tickets.

Everything, therefore, would seem to point to the film industry – for so long a neglected pariah in terms of governmental priority – finally getting its due.

But…

Just a day before the Interim Union Budget was tabled in the Indian Parliament, Kerala Finance Minister TM Thomas Isaac presented his state’s annual budget in Thiruvananthapuram. At the very end of his speech lay a sting in the tail for the film industry – the announcement of a 10-per cent Local Body Entertainment Tax (LBET) on film ticket sales.

In effect, all the relief granted by the GST Council’s rate reduction has been cancelled out in Kerala by this decision of the state government. Talk about giving with one hand and taking away with the other!

And Kerala is not the only state to have this, quite literally, ‘double standard’.

Tamil Nadu has witnessed several theatre strikes on the issue of the additional LBET burden on film tickets which currently is 8 per cent for Tamil films, 15 per cent for non-Tamil movies and 20 per cent for foreign films. In October 2018, cinema halls across Madhya Pradesh had downed shutters to protest the imposition of LBET by the Municipal Corporations in Indore (5 per cent) and Bhopal (20 per cent). Plans to enforce LBET are in various stages of consideration in various other states too.

What is particularly inexplicable about the various states’ decision to implement (or contemplate implementing) LBET is that the supposed rationale for this move – to make good the revenue loss suffered by states on account of GST – is explicitly addressed by the Goods and Services Tax (Compensation to States) Act, 2017, whereby the Central Government has to compensate state governments for such losses for a period of five years.

Further, while the additional tax burden may be a massive dampener for the film industry and its consumers, it is hardly a huge revenue earner for governments. As pointed out in the very well-reasoned and comprehensive representation made by the Producers Guild of India to the Madhya Pradesh government pleading for the withdrawal of LBET, even in the pre-GST era, Entertainment Tax contributed less than 0.10 per cent of the state’s overall revenue kitty.

The decision to enforce LBET is no doubt a matter that comes under the domain of various state governments/ local bodies and is technically outside the Central Government’s purview. However, as repeatedly lamented on this page, the root cause of this problem lies in the leeway that the GST law gives these local authorities to have this option to begin with.

So while the Central Government may not be directly responsible for the decisions of the Tamil Nadu, Madhya Pradesh and Kerala state governments – as also other state administrations contemplating similar actions – it is well within the scope of its powers to get rid of the very basis of this issue by repealing the provisions that make the imposition of LBET possible.

Correcting this anomaly becomes all the more pertinent given the Central Government’s stated resolve to encourage and facilitate the nation building role played by the film industry. After all, if state governments can thwart the consequences intended by the GST Council’s rate reduction, it does not inspire much confidence in the efficacy of the single-window clearances announcement in the Interim Budget as that requires an even higher degree of involvement by various state governments and municipal authorities, as well as multiple departments like the police force, fire brigades, Animal Welfare Board et al.

In this season of reignited hope, when the film industry finally feels that it is on the cusp of a much brighter future thanks to a responsive and sympathetic administration, one hopes that the shadow cast by LBET is dispelled swiftly and unambiguously.

Else, the mixed signals received from two different budget speeches in the span of 24 hours would make it seem almost like a ‘good news-bad news’ joke… with the joke being on us.

- Nitin Tej Ahuja

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