Budget brings cheer for Kollywood town

Finance Minister Pranab Mukherjee’s statement during his budget speech that copyright relating to cinematography in the film industry will be exempted from service tax has come as a relief for the Indian film industry, which, interestingly, is celebrating its centenary this year.

Earlier, on February 23, heeding a call for strike by the Film Federation of India (FFI), the entire Indian film industry had shutdown as a token protest against the Central Government’s proposal to levy service tax for films.

A core committee comprising senior members of the film industry, along with members of parliament, had presented detailed statistics stating the losses of the film industry and the meagre success rate to the finance minister.

L Suresh, honorary secretary of the South Indian Film Chamber of Commerce (SIFCC), says that more than what the exemption means, one has to look at what its implementation would have done to the industry. “The service tax on copyright went on a multiple level. Tax will have to be paid at every stage of the process. So, it would have been individually 10.3 per cent tax for the producer, distributor and the exhibitor, taking away almost 31 per cent of the revenue,” he says. When we explained this to the Finance Minister, he was kind enough to look at its impact and agreed to add it to the negative list, he adds.

T Siva, vice president, Tamil Film Producers’ Council (TFPC), explains, “If a producer is selling his film to a corporate for ` 10 crore, he would have had to pay Rs 1 crore as tax. Similarly, the corporate would have to pay 10.3 per cent tax when selling to a distributor. And distributors and exhibitors will also have to pay 10.3 per cent tax individually.”

The biggest relief of this exemption is for theatre owners in the state who are currently paying 30 per cent entertainment tax to the state government. Valliappan, the director of a city-based theatre, says, “If the proposed service tax of 10.3 per cent had been added, it would have taken away 40 per cent of the share of distributors and exhibitors from the revenue. At a time when theatres are closing down, this move will provide some measure of relief.”

In short, if a ticket costs ` 100, ` 40 would have gone as tax, thus eating into the revenue for theatres that are already reeling under diminished footfalls. Also, they would not have been able to hike ticket prices to offset the loss due to the tax.

Meanwhile, Suresh says that while the bigger problem of exemption of service tax relating to copyright has been solved, the new budget has also given rise to a new, smaller burden. “The budget mentions that service tax will be levied for individuals in the film industry, who are earning more than ` 10 lakh. This includes actors and technicians, who are now likely to pass
on this burden to the producer,” he feels.

Gain: A producer selling his film for ` 10 crore would save ` 1 crore after service tax on copyright exemption
Theatre owners will now have to pay only the entertainment tax levied by the state government and save 10 per cent of the revenue

Pain: Actors and technicians, who will now have to pay service tax, are likely to pass on this burden to the producer