The entertainment industry in India has been bracing through some tax related key issues, such as tax risks management, cash blockage, effective tax rates, a broad range of indirect taxes, and dual tax levies. Moreover, these taxes weren’t under the purview of the Central Government and hence are differently levied across the States in India. With the new tax reform – Goods and Services Tax – things however will get easier for consumers on paying entertainment tax. However, for home entertainment options such as purchasing and usage of an HD set top box there will be a 3% increase in taxation. Let’s see how will GST bring about changes to the existing tax regime in response to entertainment industry in India?
DTH and Cable TV Services Tax Post GST
The DTH and cable TV services are now expected to levy a GST rate of 18% proposed for these services. On the other hand, prior to GST, service tax was levied at a flat 15%, while entertainment tax was varied when it comes to different states within the country. That is, combining service tax and entertainment tax, the rate came between on average of 21% and 24%, depending upon the geographical base of the entertainment center. Under GST, both service tax and entertainment tax are now absorbed, thus fixing the rate at 18% for cable TV as well as DTH HD plans as well as SD plans, with effect from 1st, July, 2017. However GST will impact every sector like Telecom sector to Health sector.
Following is the list of the entertainment tax disparity applicability of some states across India before GST:
| States | Percentage |
| Maharashtra | 45% (Marathi films are not levied) |
| Kerala | 30.00 % |
| Delhi | 20.00% |
| Gujarat | 20.00% (Guajarati films not are levied) |
| Tamil Nadu | 15% (Tamil films not are levied) |
| West Bengal | 2% for Bengali films |
| Karnataka | 30% (Kannada films not are levied) |
| Andhra Pradesh | 20% (15% for Telugu films) |
| Uttar Pradesh | 30% to 40% |
Under the pre-GST era, VAT credits on capital goods and inputs in India procured domestically, or on special additional on capital goods and inputs imported, were not rewarded to the service providers. Thus GST could be construed as a ‘value added tax regime system’ while entertainment tax previously levied by the States as a ‘turnover tax’. Thus under GST, service providers are eligible for the following:
1). Lower Tax Rates
2). Lower Headline Rates
3). and Full Input Tax Credits (ITC) for Input and Output Services
The Final Word
As far as the entertainment industry is concerned, GST is perceived to be a boon. Though the service tax on DTH has increased, consumers can enjoy their favorite shows with HD packages, As the service providers will offer their consumers some cost-effective Dish TV HD packages. The multiplexes owners are going to reap a hike of profit rates. It would seem pertinent that multiplexes will attract more crowds, but with access to exclusive movies, documentaries and TV shows, the DTH operators are likely to grow their customers base who would be willing to shell the 3% extra tax vis-a-vis the auxiliary expenditures of a cinema hall. It will not be surprising if consumers in the near future turn to their HD set top box to meet their entertainment needs with picture and sound effects that match a theatre. With interactive TVs becoming a rage, the positives are there for asking. Overall, GST is a game-changer for the entertainment industry in India!