Introduction

The Goods and Services Tax (GST) regime, implemented in India in July 2017, aimed to streamline the taxation system by subsuming various indirect taxes into a single tax structure. The entertainment industry, encompassing cinema, television, live performances, and digital content, has experienced significant changes under this new tax framework. This article delves into the applicability of GST on entertainment services, the tax rates involved, and the implications for consumers and service providers.

1. Subsumption of Entertainment Tax

Prior to the GST regime, entertainment tax was levied by individual states, leading to a complex and varied taxation system. Rates ranged from 0% to 110%, depending on the state and the nature of the entertainment service. With the introduction of GST, entertainment tax was subsumed, aiming to create a uniform tax structure across the country .

However, some states continue to levy additional local body entertainment taxes (LBET), which can range from 10% to 25% on cinema tickets and other entertainment services. This dual taxation has led to concerns about increased costs for consumers and reduced margins for service providers .

2. GST Rates on Entertainment Services

Under the GST framework, entertainment services are categorized into different slabs based on the nature of the service:

• 18% GST: Applicable on services such as circus, theatre, drama, and Indian classical dance (including folk dance) .
• 28% GST: Imposed on services by way of admission to entertainment events or access to amusement facilities, including cinema exhibitions, amusement parks, racecourses, casinos, and sporting events like the Indian Premier League (IPL) .
• 0% GST: Levied on services by way of admission to museums, national parks, wildlife sanctuaries, tiger reserves, or zoos .

3. GST on Cinema and Movie Tickets

The cinema industry has witnessed notable changes under the GST regime:

• Tickets priced at ₹100 or less: Attract a GST rate of 12%.
• Tickets priced above ₹100: Subject to a GST rate of 18% .

Before GST, cinema tickets were subject to state-specific entertainment taxes, which varied significantly. The introduction of GST has led to a more standardized tax rate, although the imposition of additional local taxes in certain states has offset some of these benefits.

4. GST on Food and Beverages in Cinemas

Under the GST framework:

• Food and beverages supplied independently: Treated as restaurant services and taxed at 5% GST without input tax credit (ITC).
• Food and beverages bundled with cinema services: Classified as a composite supply, attracting GST at the rate applicable to the principal supply, which is 18% or 28%, depending on the ticket price .

This differentiation aims to clarify the tax treatment of food and beverages in cinemas, although the practical implications for consumers and service providers may vary.

5. GST on Broadcasting and OTT Services

The broadcasting sector, including Direct-to-Home (DTH) and cable television services, is subject to an 18% GST rate. Similarly, Over-The-Top (OTT) platforms offering digital content such as movies, television shows, and music are also taxed at 18% GST .

For services provided by artists and technicians:

• Artists: Services in folk or classical art forms with consideration up to ₹1,50,000 are exempt from GST. Other services attract an 18% GST.
• Technicians: Services involving the transfer or use of copyright are subject to 18% GST on a reverse charge basis, placing the tax liability on the service recipient .

6. Impact on Consumers and Service Providers

The implementation of GST has had mixed effects:

• Consumers: In states where entertainment taxes were previously high, GST has led to reduced ticket prices. However, the imposition of additional local taxes in certain states has mitigated these benefits .
• Service Providers: The ability to claim input tax credits (ITC) has reduced the cascading effect of taxes. However, the dual taxation in some states and the increased GST rates on certain services have increased the overall tax burden .

7. Challenges and Controversies

The GST framework has not been without its challenges:

• Complex Tax Structure: The differentiation between various types of entertainment services and the imposition of additional local taxes have led to a complex tax structure, causing confusion among consumers and service providers .
• Public Outcry: Decisions such as the varying tax rates on different types of popcorn have sparked public outrage, highlighting the complexities and perceived inconsistencies in the GST system .

8. Conclusion

The introduction of GST has brought about significant changes in the taxation of entertainment services in India. While it has aimed to create a more uniform tax structure and reduce the cascading effect of taxes, the imposition of additional local taxes in certain states and the complexity of the tax system have posed challenges. Moving forward, there is a need for further simplification and standardization to ensure that the benefits of GST are fully realized by both consumers and service providers.