Entertainment is one of those industries that are liable for more than one taxes in India. In addition to the central taxes, states as well as local authorities used to charge taxes on entertainment services such as movie theatres. However, all these taxes have now been replaced with a single tax after the implementation of the Goods & Services Tax (GST) in India. Let’s see the impact of GST on Entertainment.
Tax on Entertainment Before GST
Before the implementation of GST in India, there was an entertainment tax on the various entertainment related services. The tax rate varied from 0 to 110 percent depending on the service type, location, and other benefits.
There was also a service tax + VAT charged on all types of entertainment related services, including the food offered at movie theatres. The VAT was charged at the rate of 14.5% and service tax at 15% rate. However, the industry used to get a subsidy of 60% on service tax and had to pay only 6% (40% of 15%) service tax. So, the total tax amounted to 20.5% (6% service tax + 14.5% VAT) in addition to the entertainment tax mentioned above.
GST Rate on Entertainment in India
The Goods and Services Tax is a standard tax system that is applicable to all taxable supplies in India. Therefore, all the existing taxes on entertainment services have been replaced by a single GST tax now.
The GST rate varies between 18% and 28% depending on the type of entertainment service and/or products. Take a look below.
Items under 18% GST: Movie tickets( 18% GST for tickets above Rs. 100 and 12% for tickets up to Rs. 100), Circus, TV and DTH services, theatre and classic dance performances (including drama and folk dance) fall into this category of tax.
Items under 28% GST: Casinos, racing, movie festivals and events, amusement parks, and any sporting event will be charged at this rate.
GST Impact on Consumers
Depending on the existing entertainment tax rate in specific states, GST has either increased or decreased the overall cost of entertainment for end consumers.
Before GST, the movie tickets were taxed at 30% average entertainment tax rate and the food provided at movie theatres was charged with 20.5% VAT + Service tax.
After GST, there is a 28% tax on movie tickets and food and beverages are charged at the standard rate of 18%. On average, the GST rates are lower as compared to the previous VAT (+ service tax). However, the states which already had low entertainment tax or no tax before will now see an increase in the cost of entertainment under GST. GST on entertainment mainly the cost of movie tickets may differ from one state to another.
In addition to the above tax, GST also has the provision of allowing individual states to charge an additional local body tax (LBT) on the entertainment services being offered in their respective states. This will further increase the cost for end consumers.
GST also gives local municipal bodies the freedom to charge an additional tax on entertainment services in their areas. This may further add to the cost of these services.
GST on Entertainment Service Providers
The owners in the entertainment industry will also have to pay GST on entertainment services, including ticket sales and food & beverages sold by them, however, the additional tax can be recovered through input credits (ITC) on the service components such as rent, security and other related services of the entertainment facilities.
To conclude, GST will decrease the entertainment services cost in most of the states in which entertainment tax was higher than 28%. However, the states which already had low or no tax on entertainment services will see a rise in the cost of movie tickets and other related services.
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