Bollywood wants entertainment tax abolished

Mumbai, Feb 13 (IANS) Bollywood producers have asked Finance Minister P. Chidambaram to do away with the entertainment tax (ET) levied on each cinema admission ticket by states. The ET varies from 30 percent to 100 percent.

Citing the example of multiplexes that have grown leaps and bounds in the country after ET exemption was given to them for 5five years, producers argue that if ET is abolished, the exhibition sector including single-screen cinemas will also get a fillip it now needs.

Producers are of the opinion that since the film industry's three key sectors - production, distribution and exhibition - are already overburdened with taxes levied at multiple points, ET is an uncalled-for tax.

'The key source of revenue for all these three sectors is the box office. So, ET serves only as a deterrent to their growth,' T.P. Aggarwal, president of the Indian Motion Picture Producers' Association (IMPPA) wrote in a letter to the finance minister.

Aggarwal also pointed out that service tax should not be imposed at multiple points.

'At present, it is levied on the same movie at multiple points, such as, when advertisements of the movies are issued, when manpower is recruited for making movies and when equipment and locations to shoot the movies are hired,' he said.

Besides, a producer is expected to pay service tax to the location owner when he hires the location for shooting as well as to the equipment supplier when he hires cameras, lights and other equipment.

This over and above the customs duty and octroi that he pays for hiring them, Aggarwal pointed out.

He added a producer also has to pay service tax when he gets his movie sound transferred, sound recorded, dubbed and mixed at the recording theatre and when he gets the same processed by the lab and the prints made for release.

'If this is not enough, when a producer sells the rights of his movie for exploitation in the market, he is also required to pay VAT (value-added tax) as well as stamp duty,' he said.

Aggarwal said that the compounding effect of service tax on the production sector accounts for as much as 40 percent of the total production cost on which 12.36 percent service tax is imposed.

In his letter to Chidambaram, the IMPPA president explained that there was no justification for imposition of custom duty and countervailing duty on negative raw stock (film) as well as cameras and other equipment, which producers, of necessity, have to import as the same are not manufactured here.

These duties are levied on imported products mainly to protect the domestic industry.

He said that as a result of the compound effect of piracy, cable TV and satellite TV, the exhibition sector of the industry has already been crippled and the average annual occupancy of cinemas has come down to approximately 10 percent to 20 percent.

'The situation can be reversed, at least partially, if the ET is abolished. If it is done, more money will be generated at the box office and that alone will have cumulative effect on all the three key sectors of the film industry,' he reasoned.

He also pleaded that just as the broadcasting industry has been exempted of Section 72A of the Income Tax Act of 1961, the exhibition sector should also be accorded the same exemption, at least, on the 50 percent of its book income.

Further, he said that the base for Fringe Benefit Tax for the entertainment industry should be reduced from 20 percent to 5 percent as in the case of computer software industry.