Entertainment tax

Entertainment tax is a tax imposed by the government on feature films getting a wide release in India and are reduced from gross collections. The amount after deducting entertainment tax is known as nett.

In India

In India, movie tickets, large commercial shows and large private festival celebrations may incur an entertainment tax.

Entertainment falls in List 2 of the Seventh Schedule of the Constitution of India and is exclusively reserved as a revenue source for the state governments. Historically, before India acquired independence, British government imposed heavy taxes on the events of amusements and entertainment, where a large gathering of Indians could have caused rebellion or mutiny. Thus, various entertainment tax acts of the state governments permit the rate of tax beyond 100%. After independence, old enactments continued and there has been no revision or repeal of these acts.

This source of revenue has grown with the advent of pay television services in India. Since, entertainment is being provided through the services such as broadcasting services, DTH Services, Pay TV Services, cable services, etc. The component of entertainment is intrinsically intertwined in the transaction of service, that it can not be separated from the whole transaction. Given the nature of transaction of service, it is being subjected to tax by the Union and the State governments both.

The fiscal principle underlying article 246 of the constitution of India separates the sources of taxation for the Union and the States and also maintains the exclusivity. This article also provides that in case of conflict between the powers of Union and the States, the Union power to tax shall supersede the power of the State to levy tax on the taxable event or in relation to the subject or object of taxation. Entertainment tax structure in India varies across states and is the highest in Uttar Pradesh at 60 per cent. In Maharashtra, entertainment tax was reduced by five per cent in 2005 and now stands at 45 per cent. There is no tax for Marathi films in Maharashtra, and in Tamil Nadu, Tamil films are tax free if they have a Tamil title and a U certificate from the Censor Board. Failing any of these, films are imposed a 15% tax.

The entertainment industry in India is facing the challenge of double taxation on such transactions.

Maharashtra Entertainment Duty Act, 1923

The Maharashtra government imposed an additional 10 percent entertainment duty on movie tickets priced between Rs.251 and Rs.350 from January 16, 2013. However, tickets costing between Re.1 and Rs.250 will see no fresh levy. The government has also allowed theatre owners to collect Rs.11 as service charges on all tickets, up from Rs.6 now. The new tax slab is somewhat likes this: If a multiplex or theatre owner charges up to Rs 250 per ticket, he will not have to pay any additional surcharge.

If a ticket is priced between Rs 251 and Rs 350, the theatre or multiplex owner will be charged 10 per cent more; if a ticket is priced between Rs 351 and Rs 500, the owner will have to pay 15 per cent more, and if the ticket is priced more than Rs 501, the charge will be 20 per cent more. Mirror has learnt that theatre and multiplex owners will have to go for computerised booking system so that the number of tickets sold is on record. The Central Government's decision is effective from this month, and film and TV actors will be charged 12.36 per cent service tax on their earnings on programmes and endorsements.

ΉAs per the new slab, for tickets up to Rs 250, there will be no additional tax other than the existing 45 per cent. For tickets costing Rs 251–350, government will charge 49.5 per cent entertainment tax. For tickets priced at Rs 351–500, the new tax will be 51.75 per cent, while tickets costing Rs 500 and above will attract 54 per cent tax. Maharashtra has 64 multiplexes. The state is expected to get additional revenue of Rs 30 crore in its coffers. Maharashtra has 64 multiplexes and 549 single-screen theatres. The cabinet has also approved to give a five-year tax exemption to single-screen theatres under municipal councils and a seven-year exemption in rural areas. Service tax is 12.36% and Maharashtra VAT is 5% on non-theatrical. The total tax in Maharashtra is 45% as entertainment tax, 5% VAT on non theatrical and in addition there is a stamp duty on the agreements entered in Maharashtra. The VAT on theatrical was waived from May 2011 but there is still a past issue from 2005 to 2011 which the government is yet to exempt.

Sr No State Entertainment Tax Applicable on Gross Tkt Value 1Andhra Pradesh 20% (15% for Telugu Films) 2Assam, Himachal Pradesh, Jammu & Kashmir, Punjab and Uttaranchal Nil 3Bihar 50.00% 4Delhi 20.00% 5Gujarat 20.00% 6Haryana 30.00% 7Jharkhand 110% (Nil for Jharkhand Films) 8Karnataka 30% (Nil for Kannada Films) 9Kerala 30.00% 10Madhya Pradesh20.00% 11Maharashtra 45% (Nil for Marathi Films) 12Orissa 25.00% 13Rajasthan30% (Nil for Rajasthani Films) 14Tamil Nadu 15% (Nil for Tamil Films) 15Uttar Pradesh 30% to 40% 16West Bengal30% (2% for Bengali Films) - See more at: http://business.mapsofindia.com/india-tax/entertainment.html#sthash.N6W0EQLE.dpuf

Rajasthan no-tax policy

In March 2011, Rajasthan become the first state to exempt theatres from entertainment tax. In March 2009, the Rajasthan government started levying an entertainment tax of 23.08 per cent on gross and 30 per cent on net sales. Earlier in 2008, the government had reduced the entertainment tax from 40 per cent on net to 30 per cent on net sales.