Ease of doing business: Multiplexes seek GST reforms on movie tickets, F&B

Multiplexes want GST reforms on tickets and F&B, along with single-window clearance, to make cinema more affordable and help boost screen growth to 10 per cent annually

Multiplex chains in India are seeking rationalisation in the Goods and Services Tax (GST) on film tickets to make the movie-going experience affordable for audiences. They are requesting that the price of the tickets be kept in the lower tax slab of 5 per cent.

 

Industry executives added that they anticipate the inclusion of input tax credit (ITC) on the food and beverage segment to boost their overall business. Additionally, they are also requesting the government for a single-window clearance for licences for the ease of doing business. All these moves, the executives believe, will give cinema exhibitors confidence to add more screens at a faster rate of 10 per cent annual growth.

 

Kamal Gianchandani, president, Multiplex Association of India (MAI), told Business Standard that apart from the Covid period, inflation is another factor which makes the current tax slab impractical for the industry.

 

“To make it more practical and relevant to today’s context, tickets up to ₹300 should be subjected to 5 per cent and anything higher than ₹300 can be subjected to 18 per cent GST. If this request is implemented by the government, there will be a drop of ₹40 per ticket cost in India. For Tier-II, III cities, this drop will be significant and spur demand,” he said.

 

Currently, the GST on movie tickets is 12 per cent for tickets priced up to ₹100 and 18 per cent for tickets priced above ₹100. This tax structure was implemented in 2018. Since then, the industry has seen many changes, bearing a major impact during the Covid period.

 

“Right now, there are two brackets (of tax on movie tickets) ₹100 and more than ₹100. I recommend having a single bracket because we still sell tickets for ₹99 under weekday offers and morning shows,” said Bhuvanesh Mendiratta, managing director (MD), Miraj Entertainment.

 

“The current structure complicates things. A single slab of 5 per cent would make more sense. However, tickets above ₹500, which are usually for gold class or premium categories, can continue at a higher tax rate like 12 per cent or 18 per cent, as those customers can afford it.”

 

Contrary to these views, Ragesh Mehta, senior finance officer, MovieMax Cinemas, said that these reforms in GST for movie tickets will not boost footfalls for the cinema exhibitors as content still plays a huge part. He noted that audiences were ready to pay higher ticket prices for films like Pushpa 2: The Rule in the range of ₹800 to over ₹1000. Mendiratta and Gianchandani state that making movies more affordable will help the cinema exhibition segment become more competitive with the over-the-top (OTT) platforms. 

 

“A single-window clearance for licences will be helpful. Currently, it’s a long and complicated process. Another important step would be government incentives for new investments. For example, if some form of subsidy is given when we open new cinemas, it will reduce capex costs and encourage expansion. At present, very few states have such provisions, and even those are limited. If these benefits are introduced, the industry will have a better network and expand faster,” Mehta noted.

 

On the other hand, Gianchandani highlighted that if the ITC is added in the food and beverage section, it will help uplift the overall business for multiplex chains in India. Meanwhile, food and beverage contributes nearly 40 per cent of Miraj Entertainment’s total sales, but the inability to claim input on expenses such as rentals, housekeeping, security, and maintenance adds to costs, said Mendiratta. He added that by allowing ITC, it would directly improve the company’s bottom line.

 

In general, out of 100 ticket sales, 60 per cent is contributed by tickets and 27.5 per cent is contributed by food and beverage businesses, with the rest being advertising and other segments, as per MAI.

 

“If these reforms happen, I believe India can target at least 10 per cent growth in screens year-on-year (Y-o-Y) from the current base of 9,000 screens,” Mendiratta said.

 

Gianchandani said, “Our growth rate, which is about 3 to 4 per cent every year currently, can go up to 10 per cent annually if the government improves the ease of doing business and rationalises the GST tax structure as per our request.”

 

He added that India has the headroom to grow to 20,000 screens, with India having the potential to be close to China’s screen count.