Multiplexes in Chennai to go on strike

In response to a notification issued by the Greater Chennai Corporation, levying a Local Body Entertainment Tax of 20% on non-Tamil films and and 10% on Tamil films, with effect from 27th September 2017, in addition to the already prohibitive 28% Goods and Services Tax on cinema tickets, all multiplexes operating in the city of Chennai have announced that they are going on strike starting today, ie, 3 October, 2017.


Under the erstwhile indirect taxes regime, State Governments were levying an entertainment tax on exhibition of films in cinema theatres and multiplexes. With the advent of Goods and Services Tax (“GST”), entertainment tax levied by State Governments was subsumed in GST, and hence, State Governments stopped charging entertainment tax on cinema tickets, since these were subject to GST. However, the State of Tamil Nadu empowered local bodies within Tamil Nadu to start levying entertainment tax, in addition to GST, and in pursuance thereof, the Greater Chennai Corporation has notified that it will start levying a 20% entertainment tax on non-Tamil films and a 10% entertainment tax on Tamil films, in addition to the 28% GST being levied on cinema tickets being sold within Chennai.


MAI believes that this levy of local body entertainment tax (“LBET”) by Chennai Corporation leads to double taxation, on an industry which is already reeling under the impact of high tax rates and piracy, and could well sound the death knell of the film industry. Therefore, such levy of LBET should be rolled back immediately. All multiplexes operating within the jurisdiction of the Chennai Corporation, shall go on strike with effect from today, ie, 3 October, to protest against this grossly punitive and unfair taxation.


MAI has time and again pointed out before various regulatory bodies that the levy of LBET, in addition to GST:


  • Significantly increases the tax cost for cinema exhibition and hence is inflationary;
  • Goes against the principle of “One Nation, One Tax” and frustrates the GST model, and leads to the same problems that have plagued industry so far – a multiplicity of very high tax incidences;
  • Will result in cascading of taxes, since such levy will be added to the transaction value (ticket price that a patron pays), and GST will be levied thereon. In essence, such LBET re-ushers the unfortunate position of tax on tax, which was to be done away with under GST regime;
  • Not being creditable, is contrary to the main principle of GST - one fungible indirect tax across the entire value chain;
  • Distorts the principle of equivalence, since under the erstwhile indirect taxes regime the local bodies, etc. were generally not charging or levying such an entertainment tax.


Mr Deepak Asher, President of the Multiplex Association of India said “We most humbly appeal to the Honorable Chief Minister of Tamil Nadu Shri Edappadi K. Palaniswami and the Commissioner of Greater Chennai Corporation Shri D Karthigeyan to kindly consider our request favorably and withdraw the LBET levied on the film exhibition industry in Chennai immediately. We believe such withdrawal will ensure the survival of the film industry, and will support an environment of safe, secure and wholesome entertainment option for the population of Chennai. On the other hand, continuance of an LBET, in addition to GST, will render cinema exhibition unviable, and will eventually kill the film industry.”


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