Since 1996, when the then chief minister HD Deve Gowda exempted Kannada (also Tulu, Kodava, Konkani and Lambani) films from entertainment tax (ET), the film industry in the state has enjoyed this freedom. But now, with the new Goods & Services Tax (GST) to impose tax on films across India, Sandalwood is running scared. It fears that GST would force ticket prices upwards, resulting in fewer footfalls at the theatres.

Tamil Nadu is the other state that exempts Tamil films in that state from ET.

The common “threat” has now forced the two film industries to join hands to get exempted from GST.

For the last several weeks, intense discussions with the powers that be have been taking place.

The ET, which was 110 per cent, a few decades ago, was brought down to 50 per cent, and then to 30 per cent. This 30 per cent now applies to non-Kannada films in Karnataka.

In the other south states (apart from Karnataka and Tamil Nadu), entertainment tax applies to the respective home language films, too.

In Andhra Pradesh/Telangana, the rates are seven and 14 per cent for local films and 24 per cent for non-local films. In Kerala it is a uniform 25 per cent.

Former president of Karnataka Film Chamber of Commerce (KFCC), KV Chandrashekar, revealed what various meetings of film industry people planned to request the Centre. “There are various slabs in the GST. The minimum is five per cent. We are aiming for it. If you see ET across India, six states exempt their own languages from ET. Another 10 states do not have ET on films. So a large number of films are not paying ET at all. The Centre, on the other hand, may not exempt us completely. The only exemption is to public services like rice mills etc. The best we can do is aim for the lower slab. In our discussions, we are trying ways to avoid the 24 per cent tax. If not 5 per cent let us accept 9 per cent. If 24 per cent is imposed, non-Kannada films will pay less tax (from 30 to 24) while Kannada films will go up from zero to 24,” he said.

Another former KFCC president, Thomas D’souza, said, “The issue is being considered seriously. As of now there is no clarity, and various rates of tax are being talked about. We have spoken to many experts and they too say that more clarity from the Central government is needed. Kannada films will be the worst affected as we have been enjoying exemption since CM Deve Gowda granted it. As of now a tax of 12+12 per cent is being cited. We will go from zero to 24 per cent. Some states have a higher tax rate. Even during the recent International Film Festival of India in Goa, the issue was discussed. I pointed out that Hindi films that pay up to 45 per cent tax in some states will have to pay less while we will be burdened. In the end it would only mean that ticket prices for Kannada films in Karnataka will increase.”

Karnataka generated Rs 233 crore in ET last financial year, all from non-Kannada films. If the GST rates are fixed at 5 per cent the revenues will drop drastically.

Chandrashekar said, “The State can then impose municipal tax on non-Kannada films to make up for some of the loss. When you made Rs 233 crore at 30 per cent, you can imagine the drop if the tax is 5 per cent. The five per cent tax is our request. We do not know if the Central government will accept it. Last year, the commercial tax department of Karnataka ​ collected Rs 44,000 crore. It will be difficult for the state to get Rs 25,000 crore under GST as half of it will go to the Centre. We are keeping our fingers crossed. Now that the date of implementation is being pushed from April 2017 to September 2017, our agonising wait has got a bit longer.”


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