In India, the entertainment tax was first introduced in the year 1948. The current rate of entertainment tax in India is 30% for most of the states. The entertainment tax is levied on movie tickets, gaming, and gambling. The rate of GST on movie tickets is 28%.
The rate of GST on gaming and gambling activities is 18%.
The state government imposes the entertainment tax and the central government levies the GST. The revenue collected from the entertainment tax is used for the development of the film industry.
The entertainment tax is a major source of income for the government and it helps in the development of the film industry.
Here are some of the basic features of entertainment tax in India:
-The tax is imposed on all kinds of entertainment and amusement activities including cinema, theatre, sports, games, recreation clubs or any other form of entertainment.
-The rate of tax differs from state to state and also from Union Territory to Union Territory.
-In some states, the entertainment tax is levied on both the organizers as well as the participants while in some others it is levied only on the organizers.
-The entertainment tax is generally calculated as a percentage of the total ticket value or gross receipt generated from the activity.
-In a few states, there is a cap on the maximum amount of tax that can be levied per ticket.
-Entertainment tax is not levied on activities which are of educational or religious nature.
-In a few states, entertainment tax is not levied if the total ticket value does not exceed a certain threshold limit.
-Entertainment tax is also not levied on complimentary tickets.
With the introduction of the Goods and Services Tax (GST) in July 2017, the entertainment tax has been subsumed into GST. Consequently, there is no separate levy of entertainment tax in India now. However, a few states had levied additional taxes on top of GST which is popularly known as ‘entertainment tax’. These states are Assam, Bihar, Kerala, Madhya Pradesh, Maharashtra, Odisha, Tamil Nadu, Telangana and West Bengal.
The GST rate on entertainment activities is 18% which is higher than the earlier effective tax rate of 15-20%. As a result of this, the overall tax burden on the entertainment sector has gone up. This has led to an increase in ticket prices for cinema and other entertainment activities.
The additional tax levied by the states on top of GST is in the range of 20-30%. The total tax incidence (GST+Additional Tax) on entertainment activities in these states now ranges between 38-48%. This is one of the highest tax rates in any sector in India.
It is to be noted that the additional taxes levied by the states are not uniform.
The table below provides a state-wise break-up of the total tax incidence on entertainment activities:
State Total Tax Incidence (%)
Assam ……………………………………….. 15
Bihar …………………………………………. 50
Kerala ………………………………………… 30
Madhya Pradesh ………………………… 40
Maharashtra ……………………………. 45
Odisha ……………………………………… 25
Tamil Nadu …………………………….. 15 (no tax for Tamil films)
Delhi ……………………………….. 20
Jharkhand…………………………… 20
From the above table, it is evident that the total tax incidence on entertainment activities in India is quite high. This has made these activities unaffordable for a large section of the population. There is a need to rationalize the tax rates and bring them down to a reasonable level. This will help boost the growth of the entertainment sector and also provide relief to the consumers.