Double Barrel Tax Gun

The last two weekends have been exceptionally bad for Tamil cinema post-GST, which was lau­nched on July 1. Theatres across the state were half ­empty—a rarity in a state where even low-budget films with a light star-cast attract a full house. “Only during heavy rains or cyclones have we seen the crowds dwindling to this extent. If this trend continues we will have to reduce the number of shows very soon,” says a theatre manager in Vadapalani, the heart of Kollywood. According to the Chennai Box Office indicator, footfalls across multiplexes and single screens came down by 30 per cent for the weekend of July 14 to July 16.

The reason for this is the steep price hikes in movie tickets after GST was implemented, although, the new tax regime cannot to be blamed exclusively for it. The massive Tamil film industry seems to be caught between conflicting Centre and state rules as Tamil Nadu has not done away with the existing 30 per cent Entertainment Tax (ET) on movie tickets. Initially, theatres blamed the 28 per cent GST for the steep hike in ticket prices—from Rs 120 to Rs 153 in the highest class in Chennai. But the ET (which goes to local bodies) was not ­taken off the ticket rates. In other states GST has already subsumed ET.

After a four-day strike by theatre owners to protest the double taxation, the state government called the film industry for talks to sort out the issue. During the talks the government argued that the ticket prices of Rs 120, which inclu­ded the ET, should be taken as MRP, on which GST can be imposed. But, despite industry representatives pointing out that all other states had given up ET once GST had kicked in, the government refused to budge.  

“Cinema tickets are almost like rationed rice now—any hike in prices is dubbed anti-people, notwithstanding the rising costs over the years,” says Abhirami Ramanathan, president of the theatre owners’ association. On the ­other hand, a senior official argues that the state cannot forfeit a vital revenue stream, which comes from ET, especia­lly when income from liquor sales and registration of properties has slumped.

Post-GST, Andhra Pradesh and Telangana have actually hiked ticket prices and fixed a ceiling of Rs 300 on movie tickets, which includes GST. Karnataka, has imposed a ceiling of Rs 200, GST inclu­ded, and Kerala has allowed theatres to fix their own rates and charged GST on the base value of the ticket. None of these states saw protests even though tickets above Rs 100 were taxed 28 per cent

But the Tamil Nadu government is dangling the usual carrot—“Allow us to impose ET but you can always claim ET exemption for your films if they meet the required criteria,” is the message to TN theatres. ET exemption, which is deci­ded by a committee appointed by the state government, has been the longest officially sanctioned bribery scam in the state. It is indicative of the extent of investment that the politics of the state has with its film industry and is telling of why a state government would refuse to follow the Centre’s guideline of having a single pan-India tax.  

In 2006, when the industry sought abolition of ET, the Karunanidhi government offered a concession. If the films had Tamil titles, they would be exempt from ET. Many films hurriedly changed their titles or simply tweaked non-Tamil titles to sound like Tamil names at the time.

In 2011 Jayalalitha imposed additio­nal conditions for claiming tax exemptions—along with a Tamil title, the film should also reflect Tamil culture and sport a U certificate. In practice, only those film producers or stars close to the ruling AIADMK could wangle an exemption while others had to cough up hefty bribes to swing their ET exemption. Even though Karunanidhi’s grandson Udaynidhi Stalin produced many films, usually light-hearted comedies with Tamil titles and U certification, he never got a tax exemption simply bec­ause he belonged to the wrong side of the political divide. He had to app­roach the courts to wrest a favourable order. Even then the state government delayed refunding the ET collected for his films. Kamal Hassan’s Papanasam (a remake of the Malayalam film Drish­yam), which is actually set in a Tamil town, was denied exemption for two vague reasons—it depicted police cruelty and the children were coached to tell lies by their father. The film had U certification, but since Kamal had just quarrelled with Jayalalitha over the release of his Viswaroopam, the film failed to qualify.

“Swinging an exemption is a costly exercise for the film producer. He first has to ‘take care’ of the censors to get a U certificate and then the state officials to get his tax exemption,” says a film public relations officer. “Ideally the ET exemption should have been passed on to the consumer, since it was not going to the state’s kitty. But instead, it was being shared by the producers and theatre owners. Movie goers continue to pay the same Rs 120 per ticket (with exemption) when they should be paying Rs 35 less.” According to a theatre owner, the loss to the exchequer by way of ET exemption could easily have surpassed Rs 55 crore a year during the last one decade. In other words, this is the amount that would have got shared amongst government officials, producers and theatre owners.

Film industry sources indicated that the current Edappadi K. Palaniswamy government is expecting a hefty one time settlement by theatre owners and producers in lieu of sacrificing ET. “Rather than bribes per movie, they want a carte blanche settlement now,” says a film producer who hopes that some finality would emerge at the July 24 meeting with the state government. “Successive governments in Tamil Nadu had got used to wielding the entertainment tax exemption offered to films as a political weapon by which they could control the film industry. That is the main reason why they do not want to let go off it,” observed G. Dhananjayan, ­producer, distributor and writer.

“The state government has also resis­ted increasing the base price of tickets, which was fixed in 2007. This had compelled most theatre owners to print coupons with prices jacked up well above the government fixed rates, while paying ET only on the latter. This coupon reality is known to all as our costs have really shot up,” says a member of the theatre owners’ association. “Our only demand is—make what we charge as unofficial rates the official rates. By charging only GST on higher base pri­ces, they will be able to collect more ­taxes from cinemas,” he adds.

Meanwhile, both viewers and actors can be seen shifting towards TV, perhaps because of the several conflicts in the Tamil film industry. Actor Kamal Hassan, whose last theatre release was in 2015, and two of his films are stuck in various stages of production, has migra­ted to the small screen opting to host the Tamil version of Big Boss. On the four days theatres were closed, Big Boss registered the highest viewership. Kamal justified the transition saying he needed the money to pay his bills.

It seems the alternatives to watching films in theatres are slowly increasing. Tamil web-serial As I’m suffering from Kaadhal, released on video-streaming platform Hotstar, has been a major ­success. Higher ticket prices would also lead to a spurt in the sale of pirated DVDs and downloads, in turn resulting in fewer theatre goers. “This double wha­mmy could cripple the film industry,” cautioned actor Vishal, president of the producer’s council.

To tackle the decreasing footfalls, some theatres made quick compromises. Ramanathan of the Abhirami Theatre complex waived off the Rs 30 convenience fee charged for online booking and saw an increase in ticket sales. More theatre owners may follow suit and some may even have to trim the exorbitant prices of soft drinks and popcorn and parking charges. The success of films of high-profile stars like Dhanush, Madhavan and Ajith, waiting to be released over the next two weeks, may also depend on how the present crisis unravels.

By G.C. Shekhar in Chennai