What happens when a film is declared tax-free
Vikrant Massey's latest Hindi film, The Sabarmati Report (TSR) has become the latest movie to get the tax-free label from multiple states. This trend is certainly not new as The Kerala Story ruled at the box office last year, boosted by entertainment tax exemption by a few state governments, and so did The Kashmir Files, in 2022. But what is this exemption and who benefits from it? Let's find out.
Criteria for declaring a film tax-free
There are no specific guidelines to decide which films can be exempted from tax. Usually, state governments and the Centre tend to waive taxes for films with a social message or those featuring inspiring figures. TSR is inspired by the real story of the 2002 Godhra train tragedy that led to the death of 59 passengers.
Entertainment tax calculation and GST's role
Before the Goods and Services Tax (GST) was implemented in 2017, states had the freedom to decide the entertainment tax on films, resulting in different rates across states. GST brought uniformity by putting movies under a 28% GST bracket. Later, two slabs were introduced: a 12% GST on tickets priced below ₹100 and an 18% GST for pricier ones.
Impact of tax exemption on ticket prices
The GST levied on movie tickets is equally shared between states and the Centre. When a state declares a film tax-free, it gives up its share of the tax, while the Centre still gets its share. The main aim of this exemption is to lower ticket prices, making the film more accessible to a wider audience.
Previous films that enjoyed tax-free status
Before TSR, a few Hindi films were declared tax-free in select states. These are Taare Zameen Par (2007), Mary Kom (2014), Dangal (2016), Toilet: Ek Prem Katha (2017), and Chhapaak (2020). Interestingly, the government of former PM Indira Gandhi had partially funded and exempted Richard Attenborough's Gandhi from tax in 1982.
