A reported proposal to increase the tax on cinema tickets by nearly 570 per cent has raised concerns among cinema operators, with Cinepolis India Managing Director and Multiplex Association of India (MAI) member Devang Sampat warning that higher ticket prices could push audiences away from theatres and eventually affect the government’s revenue as well.
Sampat said the industry has not received any official communication from the government about the reported proposal and that he learnt about it through media reports.
However, he said the industry is preparing to put forward its concerns, particularly at a time when cinema footfall is yet to return to pre-Covid levels.
According to Sampat, the industry will raise three key issues with the government. The first is the principle of ‘One Nation, One Tax’, while the other two concerns relate to the ease of doing business and the impact of higher ticket prices on consumers.
“We are going to the government with our concerns, and there are three main points. The first is that we all talk about ‘One Nation, One Tax’. If different kinds of taxes are imposed, it weakens the very purpose of ‘One Nation, One Tax’. The second issue is that it could also affect ease of doing business in India, because the tax structure will become more complicated,” he told NDTV.
However, Sampat believes the biggest concern is the sensitivity of Indian audiences to cinema ticket prices. He said even a small increase can affect footfall.
“The most important thing is that ticket prices in India are very sensitive. In our research, we have seen that even if the average ticket price increases by just Rs 3-4, footfall starts coming down,” he said.
He further explained that a decline in footfall would not only hurt cinema operators and filmmakers but could also reduce the revenue generated for the government.
“We already contribute taxes to the state and central governments from the ticket price that we collect. But if the increase in ticket prices changes consumer behaviour and footfall comes down, then ultimately it will also impact the government’s revenue,” he said.
“Footfall will come down, the government will be affected, cinema operators will be affected and filmmakers will also be affected,” he added.
Cinema Footfall Yet To Return To Pre-Covid Levels
The exhibition industry is already dealing with the challenge of bringing audiences back to theatres. Sampat said cinema footfall has still not recovered to the levels seen before the pandemic.
“After Covid, footfall in cinemas has still not recovered to the level it was at before Covid. We are trying different offers and other ways to change consumer behaviour and bring audiences back to cinemas,” he said.
He also highlighted the significance of Mumbai, which he described as the stronghold of Bollywood. According to Sampat, any major policy decision affecting cinemas in the city could have an impact beyond Maharashtra.
“Mumbai is a city which is the stronghold of Bollywood. If such a step is taken here, its ripple effect could also be seen in other states,” he said.
Sampat also raised concerns about India’s low screen density. He said the country needs more screens and policies that encourage investment in the cinema business.
“India still has a low screen density. We should increase the number of screens and promote entertainment and culture. If policies are not investment-friendly, people will not invest further and people will gradually move away from cinema,” he said.
Devang Sampat Calls For ‘One Nation, One Tax’
Sampat declined to comment directly on why the government may be considering an increase in tax. However, he said the industry’s demand would be for any new policy to follow the principle of ‘One Nation, One Tax’.
“The government knows best how to run a city and a state. Why they want to increase taxes and how they want to increase them is for them to decide. They are the best judges of that. But our demand will remain that whatever is done should follow the principle of ‘One Nation, One Tax’,” he said.
Sampat also said government support for the cinema sector can benefit the entire ecosystem. Citing China as an example, he said India needs policies that encourage investment and help expand the country’s screen count.
“If you look at the example of China, there has been a huge increase in the number of screens there. In India, we still have around 10,000 screens. On the other hand, single-screen cinemas are continuously shutting down. This is happening because we currently do not have enough friendly government policies that encourage new investment in cinema,” he said.
Small-Budget Films Could Be Hit
According to Sampat, any increase in tax would affect the entire film business because cinemas are essentially collecting agents and box office revenue is shared among several stakeholders.
“Cinema operators are only collecting agents. The money that comes from the box office goes to several stakeholders. So this will impact everyone – the film producer, cinema operator, mall owner and the government,” he said.
He expressed particular concern about small-budget films, which already face the challenge of attracting audiences.
“If audiences are not coming for small films and we have to pay tax on the shows, then ultimately we will have to reduce the number of shows for those films as well. So any additional tax is not a friendly step for any stakeholder,” he said.
Industry Wants Investment-Friendly Policies
Sampat said India could look at policies adopted by other developing countries to encourage the growth of cinema infrastructure. These include tax holidays, tax rebates and making government land available for investment.
“In many developing countries, there are friendly policies to increase screen density, such as tax holidays, tax rebates and making government land available for investment. India can also introduce such policies to expand the cinema business,” he said.
He believes the focus should instead be on encouraging investment in cinemas and creating an environment that helps bring audiences back to theatres.
“India needs to seriously think about how entertainment and cinema can be encouraged. It is important to introduce and implement such policies instead of imposing any additional tax,” he said.
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