GST rumbles: Is this Govt of India or East India Company, asks Kamal Haasan

The GST rolled out by Union Finance minister will replace from July 1, the current entertainment and service tax with a single 28 per cent tax. This puts cinema in the bracket along with liquor, cigarettes, cosmetics, five-star hotels, racing described by filmmakers as sinful category. Chennai-based producer and theatre owner Abirami Ramanathan asks, ``Why are we clubbed with sinful industry? How can art be equated with it?''

The mood in the film industry is one of indignation at the insensitivity displayed by New Delhi. The move is almost certain to kill much of the regional cinema industry, unable to bear the burden of this huge tax levy. Telugu filmmakers bemoan that New Delhi perhaps is under the impression that each one of their movies is a `Baahubali'. ``Do they know that 90 per cent of our movies flop,'' asks actor, producer and director Kamal Haasan.

Look at the present tax structure in south Indian states. Kannada films pay zero tax. Chief minister Siddaramaiah in his latest budget also capped the movie ticket rates. In Tamil Nadu, different slabs from 12 to 30 per cent exist but any Tamil film with Tamil titles and a U censor certificate gets tax free status. In Andhra and Telangana, Telugu movies are taxed at rates between 7 and 15 per cent. Now if the tax rate zooms to 28 per cent, it won't be able to take the burden. 

On 3 June, the finance ministers of all states will meet Jaitley to push the case of their respective film industries. The argument is that the filmmakers, distributors and exhibitors will have no option but to pass on the extra burden to the consumer. But if ticket prices are hiked, it will result in fewer footfalls thereby impacting the collections. 

Bollywood won't be hit to the same extent as regional cinema though even it wants Hindi films to be taxed only at 5 per cent. Different states tax Hindi films differently. For instance, in Maharashtra, while Marathi films are tax free, Hindi films are taxed at 45 per cent. Bihar taxes at 50 per cent while Uttar Pradesh pegs it at 40 per cent for tickets priced above Rs 30. West Bengal taxes at 30 per cent for Hindi and English films but only at 2 per cent for Bengali cinema. 

This means a tax slab of 28 per cent actually will be beneficial for Bollywood in several states. Regional films feel that to be clubbed along with Bollywood works to its disadvantage because while Hindi and English films have a viewership across the country, 90 per cent of regional cinema does not have takers beyond their geographical state territory. Within the south, there has been an attempt of late to explore new markets by casting a Mohanlal and an NTR together to target fans in both Telugu states and Kerala or market Tamil-Telugu bilinguals aggressively, but such movies are few and far between. 

But even if one were to look at India as a whole, in 18 out of the 24 states, the effective rate of entertainment tax is less than the proposed 28 per cent. These 18 states are home to 7031 screens out of the 9041 screens in the country. The Multiplex Association of India says this will mean 77 per cent of screens in India will end up paying more tax post GST. 

India currently produces and showcases 2000 movies in a year, of which 250 are Hindi and 150 in English. The rest of the movie pie consists of regional cinema, in which Tollywood is one of the largest producer with close to 200 films. Filmmakers point out that regional cinema dying a slow death will have not just financial repercussions but also have long-term cultural implications. 

``The cultural ethos of each place reflects a particular identity. When local films die over a period of time, the medium of cinema will not be there to showcase that state to the outside world,'' says D Suresh Babu, Hyderabad-based producer. 

The Telugu Film Chamber of Commerce is also presenting a comparison with other countries to show how they protect their cinema from the threat of Hollywood. ``Hollywood killed European cinema and the only two countries in the world who have managed to protect their film industry are France and China,'' points out C Kalyan, President of the Telugu Film Chamber. In China, films are taxed at 4.5 per cent while the rate is 5.5 per cent in France. China has also placed restrictions on release of non-Chinese films in a year and taxes them heavily. In fact, thanks to the tax benefits, the number of screens in China grew from 4400 in 2005 to 41000 last year. 

But realising that China may not be the best example to provide, the film industry is pointing to Europe to show how cinema is taxed much less than the local standard rate of tax. For example, while the standard tax in Austria is 20 per cent, films are taxed at 10 per cent. In Sweden, while the local tax is 25 per cent, the tax on films is 6 per cent. Belgium films are taxed at 6 per cent as well compared to a local tax of 21 per cent. 

The mood in the film industry, especially in Chennai and Hyderabad is clearly one of rebellion. ``If I cannot afford to pay tax, I will have to quit,'' says Kamal Haasan. ``I will not work for the government. What is this, is this East India Company?'' 

The DTH services incidentally, that owe much of their content on entertainment channels to the movie industry are taxed at 18 per cent under GST and the filmmakers are highlighting this to point out the double standards. 

The industry pleading that it cannot pay ``teen guna lagaan'' is now arguing for two different slabs for cinema. It wants Bollywood and Hollywood films to be taxed at 18 per cent and the rest of regional cinema at 12 per cent. Never before has the movie industry been more desperate to hear the word `Cut'.