GST has come as a revolution to the indirect tax regime in the country. Where the taxpayers were burdened with so many different kinds of taxes, GST did away with all of them. But with the introduction of the GST Indian economy has changed drastically. There has been a significant impact on the Indian economy in every industry. Where there have been advantages of GST, the industries have not been free from disadvantages too.
While the impact has been on every industry, here in this article, we have our focus on the Media and Entertainment Industry.
The media and entertainment industry is, without a doubt, one of the fastest-growing industries in the country. The industry has essentially gained its importance from the public at large. People strongly follow the media for every kind of news they need. And people can never miss a chance for entertainment, which keeps the doors open for the entertainment industry.
However, as pacedly as the industry has been growing, GST has had a significant impact on it. We shall question it later as to what the impact has been, whether positive or negative.
But before that, let us first know why was GST introduced in the first place?
Reason for Introduction of GST
The indirect tax regime in the country was extremely complex. The taxpayers had to pay a total of five different indirect taxes.
- Service Tax
- Excise Duty
- Custom Duty
- Sales Tax
Different tax laws governed all these taxes. This created a multiplicity of taxes for the taxpayers. There often used to be double taxation. This led to a cascading effect. Moreover, the taxpayers used to tend evading the tax for saving themselves from the burden of the cascading effect of taxation. This led to corruption.
These were the reasons that the government made efforts to bring all these different taxes under a single umbrella. GST became the name of this umbrella. The basic aim was to combine all the taxes and reduce the burden of tax on the taxpayers.
This aim served the Media and Entertainment industry as well. The tax structure for the media and entertainment industry changed significantly after the introduction of GST. Here is how.
Tax Structure for Media and Entertainment Industry under the Old Regime
The rate of tax ranged between fifteen percent to one hundred and ten percent. This rate depended on the type of services, location, and the benefits arriving out of such services.
VAT at the rate of 14.5% and service tax at the rate of 15% was combinedly levied on the entertainment-based services. This led to multiple taxations
The GST law stabilized these rates.
Tax Structure for Media and Entertainment Industry under GST Law
There are simply two slabs of tax rates in this regime- the 18% rate and the 28% rate.
18% tax is leviable when in case of services like television, DTH, circus, events, and theatres.
28% tax is leviable in case of cinemas , amusement parks, movie festivals, racing, and other sports events.
These slab rates have significantly simplified the tax structure for the industry. Moreover, the Act has overcome the major challenges faced by the industry in terms of tax rates and management of tax risks. Even the implications of cross-border transactions got simplified with the introduction of GST law.
Thus the impact can be substantially be seen over the industry. Let us get a little deeper and individually understand the impact on different service houses under the industry.
Impact on Broadcast Service Houses
If you look at the earlier tax regime, the effective rate of tax that the taxpayers paid in for their services was 25%. This included 15% of service tax and an entertainment tax, which ranged between 8-12%.
GST has cut down this tax for the industry to a mere 18%. The taxpayers need not pay different taxes. Only a single payment of GST is required.
Impact on Entertainment Houses
Entertainment houses are the companies running amusement parks or movie theatres. Although the multiplicity of taxes has been cut down for the entertainment houses as well, yet the impact is very mixed due to different rates applicable in different states. No, its not the different GST rates. The GST rate for all the states is set uniformly at 28%.
However, under the old tax regime, states had the power to decide the rates of VAT and Service taxes. Thus the degree of change in new rates varies due to differences in old rates.
However, as per surveys, the impact has been more on the negative side overall. This is because the entertainment houses are negatively affected in most of the states.
Impact on Multiplexes and Production Houses
In the earlier laws, the producers and multiplexes had to pay service taxes at huge rates. There was also a multiplicity of taxes. It was necessary to pay service tax for every process at every stage of production. The tax was levied separately for each of the services, including theatrical rights, satellite rights, etc.
GST eliminated this multiplicity of taxes by bringing all the taxes together. With GST. The taxpayers can save up to 27% of the taxes. They also get a hike of 4-5% in their margins.
With the foregoing, everything seems good on the paper. The rates levied seem to be way lower than what they were in the earlier tax regime. However, there are some differences when it came to practical usage. The problem was because the municipalities get the right to decide tax on movies and cinemas. Still, the coming of taxes under one umbrella, lower rates, more margin, all work as a great advantage for the industry.
The actual impacts are still being measured, and they will remain continued to be measured. But it can be said with assurity that the advantages of GST have been far more than the disadvantages. This essentially makes us reach the conclusion that the media and entertainment industry has been impacted more on the positive front with the new GST regime.