Analysts are of the opinion that reduced GST rates would make cinema watching more affordable and thus will lead to increased footfall
The film industry got a much needed relief when the government announced a cut in the Goods and Services Tax (GST) rates on movie tickets before 2018 came to a close.
The rate cut, which came into effect on January 1, brought the taxes down from 28 percent to 18 percent on movie tickets above Rs 100 and from 18 percent to 12 percent for tickets priced Rs 100 and below.
While the industry welcomed the decision to cut the GST rates, the audience is not happy as the benefits have not been passed on to them.
Talking to Moneycontrol, Sethumadhavan Napan, COO/Producer at DAR Motion Pictures, said: “There is definitely confusion prevailing in this aspect, people are not really sure as to when cinemas (single screens and multiplexes) are going to implement the same (GST rate cut). Unless there is absolute clarity on this across the country & that too very soon it’s going to add to the already existing woes of the movie going audience.”
Many cinephiles also took to social media to express their dissatisfaction over no reduction in ticket prices. Experts suggest that those who have watched films on December 31 and January 1 can compare the prices of the movie tickets and can file a complaint to the anti-profiteering authority if prices have not reduced.
There have also been instances when theatre owners increased the net amount on which the tax is levied and the audience did not get the benefits of GST rate cut.
Commenting on this, Napan said: “This has been a regular problem seen from time to time, especially when big ticket films release and the audience has had to bear the brunt unfortunately. I certainly hope that we do not see this happening. Exhibitor associations should ensure that this potential problem is avoided clearly as that is the right way to ensure that the new GST legislation works in the ideal way to benefit consumers (audience).”
Theatres in the Telugu speaking states are reportedly not keen on passing the rate cut benefits to the audience. They claim to have not burdened the consumers when tax was hiked, so they do not want to cut the prices when the taxes are been reduced. However, in many states the new tax rates have come into effect.
The first film to reap benefits was the Ranveer Singh-starrer Simmba. In its second week, the film got an advantage when prices of movie tickets were slashed.
Film and trade analyst Girish Johar had tweeted, “One great thing makers of Simmba have done… they have decided to pass on the GST reduction to the customers, making the ticket prices lower and more affordable… this will surely give a strong positive impact at the BO (box office) and will add more legs to its lifetime run at the BO.”
Simmba is now nearing collection of Rs 200 crore in its second week.
Analysts are of the opinion that reduced GST will make cinema watching more affordable and thus would lead to rise in footfall.
“It would definitely help in increasing footfalls by and large but it is too early to quantify the impact. We will need to wait and watch for a few months to study the actual impact and see what kind of an increase in footfalls is being noticed,” said Napan.
“Footfalls have been on a high in 2018 as compared to 2017. While this is a hat tip to the kind of content made available last year, it’s also important to continue this trend in the coming year. We want families and big groups to come back to movie theatres and to have the communal experience of watching a film. This will be possible now with the GST cut,” Vikram Mehra, MD Saregama India (Producer Yoodlee Films) said.
“As a producer we welcome the move and it will give a fillip to movie going audiences. More footfalls translates into more capital for the industry to churn new exciting content,” Mehra added.
Analysts say that theatre owners can either pass on the benefits of GST cut to their customers or they can increase ticket prices. In case of a price cut, footfalls will increase which in turn will boost their food and beverage segment. If ticket prices are raised then that would improve their overall business.
Some experts are however of the opinion that lower ticket prices will not result in higher footfalls as the film industry is not selling a standard homogenous product.
Despite the cut in the GST rates, India still has one of the highest taxes for cinema exhibition. Major countries like Switzerland, China, United Arab Emirates (UAE), France, Malaysia, and Japan have taxes on movie tickets from 0 percent, 5 percent, 5 percent, 5.5 percent, 6 percent and 8 percent, respectively.
While many say that movie going is an expensive affair in India which impacts footfalls, some believe that many other factors come into play.
“Well, I cannot call high ticket prices as the sole reason for people moving away from theatres, there is also the concern of good content and the competition that theatres have with regards to satellite TV and digital/OTT platforms as well. Despite high ticket pricing if a film is accepted by the audience in a big way then people would continue to flock to the theatres. Recently, we have seen films like Sanju, Padmaavat and now Simmba driving good crowds to theatres,” Napan said.
“If the latest legislation regarding GST on ticket prices is strictly enforced then we could probably be looking at much cheaper movie tickets and as a result a lot of regular films could also see more audience coming in. With the budget approaching I would request the government to speak to the film exhibitor bodies and ensure that the revised pricing is brought into effective right away,” Napan added.