Impact of GST Rates on the Entertainment Industry

Monisha Chaudhary

23 May, 2024

All goods and services are currently subject to the GST, with the exception of five petroleum products and alcoholic beverages intended for consumption by humans. The GST has been restricted from applying to real estate and energy (apart from the provision of construction services). We spend a lot of time enjoying ourselves. Most people work 10 to 12 hours a day during the week, like going out, watching films or exploring new locations on weekends off. Since the implementation of the GST, there is no longer an entertainment tax, and all states now impose uniform rates on entertainment services.

Before the introduction of GST, state-by-state variations in the entertainment tax for the film industry were seen, ranging from 0% to 110%, averaging 30%. According to The Economics Times, India’s media and entertainment sector is anticipated to expand at a rate of 8.8%, making it the world’s fifth-largest industry after the United States, Japan, China, and the United Kingdom.

Impact of GST on Activities in the Entertainment Industry

1. Movie screenings

• Movie sales Tickets: GST is applied at a rate of 18% when the sale price of the ticket being purchased is Rs. 100 or less. However, the GST on such tickets is 28% when the retail cost per ticket is above Rs. 100.
• Television: There is an 18% GST on broadcasting services.
• Local bodies are granted the jurisdiction to charge and collect taxes on amusement and entertainment.

2. Food and beverages

Food and beverages served at movie theatres are considered restaurant services, as held in the 50th GST Council meeting. The previous GST on such supplies used to be taxed at a rate of 12% for non-air conditioned theatres, and 18% for theatres with air conditioning have not been reduced to 5%.

3. Film distribution

Under the GST, a 12% charge is applied to the transfer of copyrights for products or for television or theatrical exhibitions of works of art. However, there is an 18% charge for the transfer of intellectual property rights related to information technology software.

4. Services provided by artists and other technicians

Services provided by artists and other technicians are to be charged at a rate of 18%, but services provided by artists are billed under the FCM basis. In contrast, services are billed by other technicians – such as authors, musicians, photographers, and artists under the RCM basis.

50th GST Council Meeting

The supply of food and drinks at movie theatres is taxable as a restaurant service if they are provided as a service separately from the cinema exhibition service, the 50th GST Council meeting held on July 11, 2023, clarified. The entire supply will be subject to GST, which will be applicable at the rate to the major supply, the service of the movie showing if it is combined and satisfies the composite supply test.

In what circumstances are the taxes applied in the entertainment industry?

In order to reduce social gatherings, a tax on entertainment was initially implemented under British administration in India. Here is a list of the locations where the entertainment tax is still in effect, despite the fact that this system continued to function after independence:

• Exhibition
• Amusement parks
• Sports-related activities
• Arcades
• Theatres
• Videogames
• Celebrity stage performances

Impact of GST on consumers

In India, the Goods and Services Tax (GST) has significantly impacted the entertainment tax. Before the GST was established, each state government assessed its own entertainment tax, which differed from state to state. While some states imposed a significant entertainment tax, others imposed none at all. The entertainment tax has been merged into a unified tax system under GST. For all entertainment services, such as movie tickets, entry and riding tickets in amusement parks, and other various types of entertainment, the GST Council has established a uniform rate of 18%.

As a result, the effect of the Goods and Services Tax on entertainment tax has been uneven, with some states reporting lower tax income and others reporting more revenue. However, the GST’s consistent tax rate and streamlined tax structure have made it simpler for businesses to abide by tax laws while also bringing down the complicated nature of the tax system.

Input Tax Credit

ITC, which was not accessible under the pre-GST regime, would now be accessible for the services part of activities like catering, renting space for movie theatres, and security charges. Therefore, the output GST from selling tickets can be used to compensate for the input GST paid when renting a space. As a result, the financial burden on owners of theatres, amusement parks, and other businesses is expected to decrease in the near future.

Conclusion

Depending on the state, the impact of the GST on the entertainment sector is ambiguous. GST will be advantageous for states with high entertainment taxes since it lowers prices for customers, while it will be detrimental for states with low entertainment taxes. Simply put, the GST benefits the entertainment sector more than it hurts it since multiplex profits are anticipated to increase while subscription and movie viewing rates decline.

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