Film industry wants entertainment tax to be subsumed in proposed GST

NEW DELHI: The Film Federation of India has appealed to the Government that entertainment tax imposed by states and local bodies should be subsumed in the proposed Goods and Services Tax (GST).

On its budget proposals to Finance Minister P Chidambaram, the FFI has said that the service tax on performing artistes should also be done away with.

In the memorandum submitted to the Ministry, the Federation says the condition on filmmakers to fill a form under Section 52A of the Income Tax Act for all payments above Rs 50,000 should be confined to only cash payments.

The Federation says the sale, distribution or exhibition of cinematographic films, not regarded as royalty under 9(1)(vi) of the Income Tax Act 1961, is nullified as it is not available under the Direct Tax Code 2010. As it is not regarded as royalty, it does not attract the 10 per cent with-holding tax under Section 194J of the Act. An amendment should, therefore, be made to exclude this from the Code.

The exemption to digital conversion - and supply to cinemas - may be put in the Mega Exemption List.

The exemption in customs duty provided for certain goods under the ATA Carnet (a uniform law applicable in 71 countries including India) does not include film equipment. As a result, it discourages foreign filmmakers from coming into India to shoot here. This should be amended to include film equipment so that more filmmakers come into India to shoot. This would also encourage the tourism and related industries.

Many Indian studios are hired by foreign filmmakers for post-production work. But under the Place of Provision of Service Rules 2012, only material brought in for repairs, reconditioning or re-engineering are covered. The Federation says that post-production is also in many ways repairing and reconditioning, the Rules should be amended to cover post-production work undertaken by Indian studios for foreign filmmakers.

Cinema theatres and digital distribution should not be subjected to service tax for Business Support Services, the Federation has said.

Similarly, the service tax on renting of immoveable commercial properties should not include cinema houses or multiplexes.

The services rendered by a digital cinema distributor were earlier exempted from service tax by the CBEC in March 2007. However, the introduction of the negative list-based service tax did not cover this. The industry, therefore, wants that the exemption of service tax in this regard should continue.

Meanwhile, Dun & Bradstreet Information Services India Pvt. Ltd has in its pre-budget demands sought a unified tax structure rationalising multiple levies can ease compliance and reduce the existing tax burden from the industry. The media & entertainment industry is presently subject to a host of taxes like service tax, VAT, entertainment tax etc.

It has also sought more clarity on the potential levy of service tax as well as VAT on activation charges and recharge coupon vouchers is expected.

Moreover, to enhance digitisation of electronic media, the industry expects abolishing/reducing the import duty on set top boxes. This will also result in reduction of capital expenditure for cable / DTH companies.

At present, the income tax act considers the subscription revenues earned by the foreign telecasting company as royalty or business income. The income from grant of distribution rights is in the nature of business income and not copyright. Hence, such payments should not be considered as royalty.