Entertainment Tax in India: GST on Media and Entertainment

Navigating the changing tax landscape has proven to be challenging for the media and entertainment industry. Consumer preferences change quickly, and margins are frequently narrow in the media and entertainment industries. The evolution of taxation from the pre-GST era, the current GST framework and rates, and the particulars of digital content taxation will all be covered in this article. You'll gain a comprehensive grasp of how GST impacts different aspects of media and entertainment, enabling you to make well-informed business decisions.

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Table of Contents

What is EPF?

What is PPF?

PF vs. PPF: Which is Safer

Liquidity of PF and PPF

PF vs. PPF: From a Taxation Perspective

Drawbacks of PF and PPF

PF vs. PPF: Which is Better?

Conclusion

Frequently Asked Questions (FAQs)

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What is Entertainment Tax?

The government levies a distinct tax category known as the "entertainment tax" on various forms of entertainment, including movie tickets, festival admission, and other sizable commercial events. Gaming and athletic events are also subject to the entertainment tax, in addition to the standard fees for cinema tickets, plays, dance performances, etc. However, the state government in question determines the tax rate.

Features of Entertainment Tax in India

The tickets we purchase to see films or major entertainment events include entertainment tax. Here are a few of the most notable characteristics of entertainment tax in India: 

• Every type of entertainment in the nation is subject to entertainment tax, which is one of the many expenses that patrons must pay. 

• Exhibitions, sports-related activities, arcades, amusement parks, celebrity performances on stage, theatre productions, and video games are also subject to entertainment tax. 

• The state governments are in charge of collecting the entertainment tax from consumers. Since state governments are in charge of it, the nation's entertainment taxes vary from one state to the next. 

• The Indian constitution's Article 246 lays forth all the regulations and criteria pertaining to the country's entertainment tax. 

• Additional taxes on entertainment have been imposed as a result of paid television services like Dish TV and Tata Sky. 

• When the British government ruled India, an entertainment tax was introduced to reduce public gatherings. Nonetheless, taxation persisted in the post-independence period as well and is still in place in every state in the union. 

Taxation under the Pre-GST or VAT regime

The following table highlights the tax levied on the entertainment sector during the VAT regime before GST was implemented.

State	Entertainment Tax
Jharkhand	110% (Nil for Jharkhand Films)
Bihar	50%
Maharashtra	45% (Nil for Marathi Films)
Uttar Pradesh	30% to 40%
Haryana	30%
Kerala	30%
West Bengal	30% (2% for Bengali Films)
Karnataka	30% (Nil for Kannada Films)
Rajasthan	30% (Nil for Rajasthani Films)
Orissa	25%
Delhi	20%
Gujarat	20%
Madhya Pradesh	20%
Andhra Pradesh	20% (15% for Telugu Films)
Tamil Nadu	15% (Nil for Tamil Films)
Assam, Himachal Pradesh, Jammu & Kashmir, Punjab and Uttaranchal	Nil

Pre-GST Regime Service Tax 

Tax Rate	15%
Abatement	60%
Effective Rate	15% x 40% = 6%

Pre-GST Regime Total Tax

VAT (Assumed)	14.5%
Service Tax	6%
Total Tax	20.5%

Entertainment Tax Under GST

Following the introduction of the GST in July 2017, the entertainment tax was incorporated into the new tax. As a result, it is rare to find "entertainment tax" imposed independently in India. Alternatively, certain states may impose an entertainment tax, which is an extra charge on top of GST. Assam, West Bengal, Bihar, Maharashtra, Kerala, Tamil Nadu, Madhya Pradesh, Odisha, and Telangana are among the states in this list. 

Here are the basics of entertainment tax under GST.

Time of Supply

Time of Supply: The earliest of the following is the time of supply of services:

• Date of invoice issuance 

• Date of payment or advance receipt

• Date of service delivery (if the invoice is not sent out within the allotted time)

Supply Duration with Reverse Charge: The earliest of the following is the time of supply for the service recipient in the event of a reverse charge: 

• Payment date (only for services) 

• 30 days after the goods invoice is issued (60 days for services)

Place of Supply

Supply of Goods: When food and food products are sold at a movie theatre, the theatre itself serves as the supply location.

Supply of Services

• The location of the service recipient is the place where services are supplied. 

• The location of the service provider will be the site of service delivery in situations where the services are rendered to an unregistered dealer and their location is unavailable.

Supply in Events

• In case of admission to an event or amusement park or any other place for services ancillary to the above, the place where the event is held or the place where the amusement park is located is considered the place of supply.

• In case of entertainment events and services ancillary to the above, the place of supply is the location of the registered person or the location of the event if the person is unregistered. 

GST on Digital Content

OIDAR, or Online Information Database Access and Retrieval services, are online sources of digital content, such as music, films, television shows, etc.

Case 1: India is home to both the service provider and the service recipient. GST @ 18%, meaning the service provider must be registered in India and be responsible for collecting the service recipient's GST @ 18%.

Case 2: The service recipient is in India, whereas the service provider is located outside of the country. India would be the supply location. Whether the service recipient is a business or a consumer, or non-business, will determine how GST is levied on such transactions.

• A business entity registered under GST is the service recipient. Under the Reverse Charge Mechanism, the service recipient is subject to taxation.

• The service recipient does not have a GST registration. Along with collecting GST from the service recipient and depositing it with the government, the service provider would also need to register in India under the GST Law.

Impact of GST on the Entertainment and Media Industry

Impact on Movies

• Movie ticket sales were free of service tax and VAT and entertainment taxes varied by state and range from 15% to 110% (average of 30%) before GST implementation. After GST, movie ticket sales are subject to 12% GST for tickets priced at Rs. 100 or less. When tickets cost more than Rs. 100, 18% GST is applied.

• Before GST, no VAT and a 15% service tax were applicable on television. Also, an 8-12% entertainment tax was levied on broadcasting services (D2H / Cable TV services). Post GST, an 18% GST is levied on broadcasting services (D2H / Cable TV services).

• Entertainment tax was not deducted from service tax or VAT paid on purchases and taxes eventually falls on the purchaser in pre-GST times. Now, local governments have been granted the power to impose and collect entertainment and amusement taxes.

Film Distribution

• Service Tax was applicable on short-term copyright transfers for cinematograph films showing in theatres or movie theatres. Producers were under more pressure to pay service taxes collected from technicians, performers, and other service providers in pre-GST times. Copyright transfer for theatrical exhibitions is now regarded as a service provision, and an 18% GST rate (up from 12% previously) is applicable.

• Because the activity is not clearly classified as a sale of goods or services, there is a problem with the dual taxation of VAT and service tax on the transfer of copyright for television exhibition before GST implementation. Copyright transfer for television exhibition is now regarded as a service provision, with an 18% GST rate (up from 12% previously).

• IPR, including copyrights and trademarks, were also considered products and subject to state VAT. Transfer of intellectual property (IP) rights for software related to information technology is taxed at 18% GST.

Food and Beverages at Movie Halls

Before GST was implemented, a dual levy of VAT and Service tax VAT @ 20.5% (Assumed) and Service tax @ 15% was applicable to food and beverages at movie halls. After GST, 5% GST without ITC is the rate that applies to restaurant services if they are provided as part of a service and apart from the movie theatre service. When combined and meeting the composite supply test, the total supply will be subject to GST at the rate that applies to the movie theatre service, which is 18% or 28% GST, depending on the situation.

On August 1, 2023, Circular No. 201/13/2023-GST made it clear that food and drink are provided separately from the movie theatre exhibition service. These are subject to a 5% GST tax since they are considered restaurant services. These sales would be regarded as composite supplies if they are combined with the cinema exhibition service (included in the ticket price). In this case, the entire supply would be subject to GST at the higher rate that is applicable to cinema exhibition.

Services by Artists and Technicians

• Artists' services were subject to a 15% service tax on a forward charge basis in the pre-GST era. Services provided by an artist in the form of a folk or classical art performance, such as dance, music, or theatre, with a fee of no more than Rs. 1,50,000 are subject to Nil GST. In other circumstances, including if the artist is serving as a brand ambassador, an 18% GST is applicable.

• Services provided by technicians such as photographers and composers were taxed at 15% service tax applied on forward charges before GST implementation. Authors, composers, photographers, artists, and others who provide their services by transferring or allowing the use of copyright are subject to 18% GST on a reverse charge basis now.

Overall, an increase in the GST tax rate for artists' services The GST reverse charge tax has increased the burden on producers while eliminating it for technicians such as composers and photographers.

Advertisement

Before GST, print media were not subject to service tax and others had to pay 15% service tax. After GST, GST on print media is 5% and others is 18%. Input tax credit is available for taxes paid on the advertisements.

Sponsorship and Brand Promotion

The pre-GST rate was 15% and the current GST is 18%.

Amusement Parks

Entertainment taxes varied by state and ranged from 15% to 110% (average of 30%) before GST and there was no service tax or VAT. The current GST rate is 18%.

In many states, like Maharashtra, local authorities also impose a Local Bodies Entertainment Tax (LBET), which ranges from 10% to 25%, on films, cable TV, and DTH services in addition to the GST. If local governments continue to impose these additional taxes, it would reduce the industry's operating margins and earnings, which would raise prices for consumers. These taxes seem to be a backdoor entry of the entertainment tax. On a state-by-state basis, the entertainment sector has both beneficial and detrimental effects.

Pros of GST Implementation for the Entertainment Industry

The following are the main advantages of the entertainment sector's adoption of the GST: 

• Improved Transparency: The GST system is more open, which lowers the likelihood of tax evasion and guarantees higher levels of compliance.

• Ease of Service Supply: Dealing with the entertainment industry has become easier thanks to a single gateway, particularly for production companies that have operations in several states. 

• Growth of Digital Platforms: In contrast to previous complicated taxing systems, platforms that provide online entertainment (OTT platforms) benefited from a uniform 18% GST rate, which encouraged the production and consumption of digital content.

Cons GST Implementation for the Entertainment Industry

The following are some concerning drawbacks of GST on cinema tickets and other entertainment: 

• Higher Tax Rates for Certain categories: A higher GST rate of 28% is applied to certain categories, such as movie tickets costing more than Rs. 100. These updated GST rates are greater than the previous entertainment taxes in several states, which means that customers will pay more.

• Effect on Local Films: Small-budget and regional films have been particularly adversely hurt by the tax rate rise. Audiences in Tier-2, Tier-3 cities and rural areas were discouraged by higher ticket prices.

Conclusion

In general, the Indian media and entertainment environment has significantly improved as a result of the new entertainment tax rates on entertainment services. Depending on how much the prior tax system burdened consumers, the precise effects vary from state to state. Regarding the drawbacks, there are problems with the high GST rates applied to movie theatres, amusement parks, and performance venues. Nonetheless, the goal has always been to modernise and standardise India's tax structure.

FAQ

Q1. What is entertainment tax?

Various types of entertainment, such as cinema tickets, sporting events, and festivals, are subject to the entertainment tax. One type of indirect tax is the entertainment tax. 

Q2. Is entertainment tax under GST?

Entertainment is subject to an 18% GST rate. This implies that an 18% GST will be applied to all movie tickets and other entertainment-related purchases.

Q3. What is the tax on movie tickets in India?

Food and drinks in movie theatres (multiplexes) are subject to a 20.5% VAT tax, and depending on the state, tickets are subject to an average of 30% tax. GST will be applied at a rate of 28% to movie tickets.

Q4. How has GST affected ticket prices for movies and events?

Since the GST was implemented, ticket costs have gone up because of higher tax rates, particularly for tickets over Rs. 100, which are subject to 28% tax. As a result, customers now pay more overall, which has caused some audiences to turn to digital entertainment platforms with more flexible pricing.

Q5. What impact has GST had on the entertainment industry’s tax compliance?

By substituting a single tax system for several different levies, GST made tax compliance easier for entertainment companies. This change simplified tax management and made it simpler for enterprises to comply, particularly the ones that operate in several states.

Q6. What are the advantages and disadvantages of GST for the entertainment sector?

Digital platforms benefited and cross-state operations were made easier by the GST's openness and simplification of the tax system. The demand and profitability of traditional entertainment providers have been impacted by the high GST rates on movie tickets and events, which have increased consumer expenses, particularly in regions with additional entertainment levies.

Q7. Can entertainment businesses claim input tax credits under GST?

Despite the fact that GST permits input tax credits, entertainment companies are subject to certain limitations on these credits. This could result in cash flow issues, especially for companies that need a large upfront investment, as they might not be able to completely recover taxes paid on purchases.