DHARMASHASTRA NATIONAL LAW
UNIVERSITY, JABALPUR
Programme: B.A. L.L.B (Hons.)
Subject: Economics-III
Semester: V
Roll No.: BALLB/064/20
Supervisor
Mr. Akshay Khandekar
Teaching Associate
A Study on Entertainment Tax of Madhya
Pradesh
Submission Date: 12/11/2022
1
Acknowledgement
I am overwhelmed in all humbleness and gratefulness to acknowledge my depth to all those
who have helped me to put these ideas, well above the level of simplicity and into something
concrete.
I would like to express my special thanks of gratitude to my teacher, Mr. Akshay Khandekar,
as well as our Vice Chancellor, Prof. (Dr.) V. Nagaraj, who gave me the golden opportunity to
do this wonderful project on the topic, “A Study on Entertainment Tax of Madhya Pradesh”,
which also helped me in doing a lot of research and I came to know about so many new things.
I am thankful to them.
Any attempt at any level cannot be satisfactorily completed without the support and guidance
of my parents and friends who helped me a lot in gathering different information, collecting
data and guiding me from time to time in making this project, despite of their busy schedules,
they gave me different ideas in making this project unique.
Thanking you,
Ojaswini Gupta
BALLB/064/20
Batch 2025
2
Contents
Abstract: .................................................................................................................................................. 4
Introduction:............................................................................................................................................ 4
Research Objectives ................................................................................................................................ 4
Research Problem ................................................................................................................................... 5
Main Objective of the Project ................................................................................................................. 5
Scope of the Project ................................................................................................................................ 5
Methodology ........................................................................................................................................... 5
Limitations of the Project........................................................................................................................ 5
Literature Review.................................................................................................................................... 5
Understanding the tax policy .................................................................................................................. 6
Taxation under Pre-GST or VAT regime ............................................................................................... 9
Entertainment Tax under Pre-GST regime ......................................................................................... 9
Service Tax under Pre-GST regime .................................................................................................. 10
Total Tax under Pre-GST regime ..................................................................................................... 10
Taxation under GST regime.................................................................................................................. 11
Time of Supply for Services ............................................................................................................. 11
Time of Supply under Reverse Charge ............................................................................................. 11
Place of Supply ................................................................................................................................. 11
Place of Supply of Goods ............................................................................................................. 11
Place of Supply for Services ........................................................................................................ 11
Place of Supply at Movie Halls .................................................................................................... 11
Place of Supply in Events............................................................................................................. 11
Value of Supply of Goods and/or Services .................................................................................. 12
GST on Online supplies of Digital Content (Music, Movies, Television Shows, etc.) ................ 12
Impact of GST on different activities in Media & Entertainment Industry ...................................... 12
Exhibition of Movies.................................................................................................................... 12
Food and Beverages at Movie Halls............................................................................................. 13
Film Distribution .......................................................................................................................... 14
Services rendered by Artists and other technicians ...................................................................... 14
Sponsorship and Brand Promotion ............................................................................................... 15
Advertisement .............................................................................................................................. 15
Amusement Parks......................................................................................................................... 15
Challenges faced and way forward ....................................................................................................... 16
Conclusion: ........................................................................................................................................... 17
Bibliography & References................................................................................................................... 19
3
Abstract:
The entertainment sector contributes significantly to the Indian economy. The industry
supports millions of jobs and the GDP to the tune of billions of rupees. The government has
implemented several levies and regulations to aid in the expansion of this business. This
paper will give a general outline of the entertainment tax in India, more specifically Madhya
Pradesh, and highlight the difficulties that Madhya Pradesh is now experiencing. We will go
over the tax's history, how it is collected, and the steps businesses must take to comply with it.
We will also focus on the Goods and Services Tax (GST), which has had a significant impact
on the indirect tax landscape.
Introduction:
Commercial shows, movie tickets, sporting events, music festivals, amusement parks,
exhibitions, theatre performances, and other private festivals are subject to an entertainment
tax imposed by the government.1 States have different levels of entertainment tax. The term
"entertainment tax" refers to indirect taxes.
Note: Entertainment tax has been replaced by the Goods and Services Tax(GST) starting 1 July
2017.2
The government structure of any nation must include taxes. On the commodities and services
that people and businesses buy and sell, many types of taxes are levied. The income received
by various people and business entities is likewise subject to taxation. The government imposes
an entertainment tax on things like cinema tickets, large-scale commercial performances, and
other private festivities.
The Project will go into additional detail regarding the outcome and effects of the tax policy,
with a focus on its socioeconomic effects. The negative effects of the tax policy will also be
explored with the use of data from various sources.
Research Objectives
-economic impact of the tax on the society.
1
https://google.com/url?sa=D&q=https%3A%2F%2Fwww.twinlightslighthouse.com%2Fentertainment-salestax-in-ocean-city-maryland%2F
2
https://google.com/url?sa=D&q=https%3A%2F%2Fwww.bankbazaar.com%2Ftax%2Fentertainment-tax.html
4
Research Problem
The Entertainment Tax of MP has been a controversial subject since its inception. During the
establishment of such tax, the government believed that the tax would prove beneficial for the
stakeholders. However, over the course of time, it has been a subject of debate. This study
would try to understand the pros and cons of this tax and understand its effect on society.
Main Objective of the Project
This project therefore initially starts with studying the aim of the tax policy, mainly focusing
on the beneficiary sections of the society by the tax policy. The initial objectives of the tax
policy are deliberated to see whether there is some expansion or inclusion of some related
objectives or not. After studying the background, objectives, aims and the beneficiaries of the
tax policy, the project move on to analyse the impact and the success of the tax policy. This
would comprise of social impacts, economic impacts, among others. This analysis would lead
to studying or finding challenges or constraints in the tax policy followed by the suggestive
measures regarding the same.
Scope of the Project
The Project covers the impact of the tax in the state of Madhya Pradesh. This project deals with
the data available online regarding the same.
Methodology
The researcher conducts a research based on secondary resources which are available online
on various blog posts, research papers of other scholars, government website, among others.
Limitations of the Project
The project only deals with the data or sources available online and does not do empirical
research.
Literature Review
1. An Overview of Entertainment Tax in India; by Sujoy Ghosh:
Entertainment tax in India is a complex and ever-changing topic. However, the GST rate for
entertainment is currently 18%. It is important to stay up-to-date on changes in entertainment
tax law, as the rates can vary depending on the type of entertainment being provided. Overall,
the introduction of GST has made the process of paying entertainment tax simpler and more
5
streamlined. However, it is still important to be aware of the rates and how they may change in
the future.3
2. Impact of GST Rates on Entertainment Tax; by S. Parihar:
The impact of GST on the entertainment industry can be both positive and negative, depending
on the state. Owners of movie halls, parks etc. stand to gain under GST thanks to the provision
of input tax credit. However, the effect of any additional local taxes (if levied) needs to be
seen.4
Understanding the tax policy
A taxation authority, typically a government, levying or imposing a financial obligation on its
inhabitants or residents is known as taxing them.5 Since ancient times, paying taxes to
governments or officials has been a fundamental aspect of civilisation.6
All involuntary levies, including estate taxes, capital gains taxes, and income taxes, are referred
to as "taxation." Although the term "taxation" can apply to both an act and a noun, it is most
commonly used to refer to the ensuing revenue.
Taxation differs from other payment methods like market exchanges in that it doesn't require
permission and isn't directly related to any services provided. The threat of force, whether
implicit or explicit, is how the government forces taxation. Because the agency enforcing the
tax is the government and not a private party, taxation is treated differently by the law than
extortion or a protection racket.
Between jurisdictions and over time, there have been wide variations in taxation. In the
majority of contemporary systems, taxes are levied on both tangible assets, like real estate, and
particular occasions, services, goods, and entertainment, like a business transaction. One of the
most important and divisive topics in contemporary politics is the creation of tax laws. It
depends on a number of variables, including consumer purchasing power, governmental
spending on a particular commodity or service, the demand for such goods and services, etc.
3
https://google.com/url?sa=D&q=https%3A%2F%2Funacademy.com%2Fcontent%2Fupsc%2Fstudymaterial%2Fcommerce%2Fentertainment-tax-in-india%2F
4
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fimpact-of-gst-rates-on-entertainmentindustry
5
https://google.com/url?sa=D&q=https%3A%2F%2Fwww.investopedia.com%2Fterms%2Ft%2Ftaxation.asp
6
Taxation Defined, With Justifications and Types of Taxes (investopedia.com)
6
The fifth-largest media and entertainment market in the world is in India. Reduced data pricing,
the Digital India plan, and the widespread availability of smartphones at reasonable prices have
all helped this industry grow. The media sector has prospered in the contemporary debate for
a variety of reasons, including the OTT platforms, the proliferation of movie theatres, fests,
carnivals, etc.
The nation's state governments are in charge of the entertainment tax. This is the rationale
behind the disparate entertainment tax rates in different Indian states. However, after the
country's adoption of the GST in 2017, things have altered. Fiscal federalism in India has been
impacted by the aforementioned policy.
To finance governmental expenses, taxation serves its most fundamental purpose. Taxes have
been justified and explained in a variety of ways throughout history. Early taxes supported the
ruling classes by funding their armies and fortifications. The power to tax frequently derives
from heavenly or supranational rights.
There have been a variety of later arguments put forth, including utilitarian, economic, and
moral ones. Progressive taxation on high income people, according to their argument, promotes
a more egalitarian society. Higher taxes on particular goods and services, like gasoline or
tobacco, have been defended as a consumption deterrent. In circumstances where the private
provision of public goods is deemed suboptimal, such as with lighthouses or national
definitions, proponents of the public goods theory contend taxes may be required.7
The entertainment tax might also be justified in the current conversation by citing economic
and utilitarian factors. The utilitarian principle of Jeremy Bentham states that one should
constantly strive to maximise pleasure and minimise suffering. Additionally, it must assist the
bigger rather than the smaller portion of society. Therefore, governments use these factors as
justification for levying an entertainment tax in order to achieve their goals of societal
advancement.
The concept of Entertainment Tax is not novel, it has been in existence in various provinces
pre-independence. In Madhya Pradesh, the Entertainment Tax was governed and regulated by,

Madhya Pradesh Entertainments Duty and Advertisements Tax Act, 19368
7
https://www.investopedia.com/terms/p/progressivetax.asp
Madhya Pradesh Entertainments Duty and Advertisements Tax Act, 1936, no. 30 of 1936, 1936MP30.pdf
(blinkvisa.com)
8
7

Madhya Pradesh Entertainments Duty and Advertisements Tax Rules, 19429

Madhya Pradesh Cable Television Network (Exhibition) Rules, 199910
The category of indirect tax includes the entertainment tax. An indirect tax is one that is
collected and paid to the government by one party in the supply chain, such as a manufacturer
or retailer, but is then passed on to the customer as part of the cost of the commodity or service.
The final recipient of the tax is the consumer, who pays extra for the good11.
By comparing indirect taxes to direct taxes, one may define indirect taxes as Taxation on a
person or an entity that is ultimately covered by another person is known as an indirect tax.
The tax will subsequently be sent to the government by the organisation that collects it.
However, in the case of direct taxes, the target of the taxation is the party that pays the tax right
away.12
The government frequently uses and imposes indirect taxes in order to raise money. Rich or
poor, everyone must pay them because they are effectively levies that are assessed to taxpayers
on an equal basis regardless of their wealth.13
However, many people view them as regressive taxes because they can place a significant
burden on those with lower earnings, who end up paying the same amount in taxes as those
with higher incomes.14
For instance, regardless of the consumer's income, the customs duties on a television from
Tokyo will be the same amount. The fact that this tax has no relation to an individual's income
implies that someone making $25,000 a year will pay the same duty on the same television as
someone making $150,000, obviously placing a heavier burden on the former15.
9
Madhya Pradesh Entertainments Duty and Advertisements Tax Rules, 1942
Madhya Pradesh Cable Television Network (Exhibition) Rules, 1999,
http://www.bareactslive.com/MP/MP119.HTM#0
10
11
https://google.com/url?sa=D&q=https%3A%2F%2Fwww.investopedia.com%2Fterms%2Fi%2Findirecttax.asp
12
Indirect Tax: Definition, Meaning, and Common Examples (investopedia.com)
13
Georgia State University, Andrew Young School of Policy Studies. "Direct Versus Indirect Taxation: Trends,
Theory and Economic Significance," Pages 1-2.
14
Institute of Economic Affairs. "Aggressively Regressive: The 'Sin Taxes' That Make the Poor Poorer," Pages
8-9.
15
https://google.com/url?sa=D&q=https%3A%2F%2Fwww.investopedia.com%2Fterms%2Fi%2Findirecttax.asp
8
Additionally, there are worries that indirect taxes might be used to support a specific
government programme by taxing some industries but not others. Some economists contend
that indirect taxes cause an inefficient market and change market prices from their equilibrium
price for this reason.16
Taxation under Pre-GST or VAT regime
As mentioned before, there have been substantial changes before and after the introduction of
GST in the country with regard to all the indirect taxes.
Entertainment Tax under Pre-GST regime
State
Entertainment Tax
Jharkhand
110% (Nil for Jharkhand
Films)
Bihar
50%
Maharashtra
45% (Nil for Marathi Films)
Uttar Pradesh
30% to 40%
Haryana
30%
Kerala
30%
West Bengal
30% (2% for Bengali Films)
Karnataka
30% (Nil for Kannada
Films)
16
https://google.com/url?sa=D&q=https%3A%2F%2Fwww.investopedia.com%2Fterms%2Fi%2Findirecttax.asp
9
Rajasthan
30% (Nil for Rajasthani
Films)
Orissa
25%
Delhi
20%
Gujarat
20%
Madhya Pradesh
20%
Andhra Pradesh
20% (15% for Telugu
Films)
Tamil Nadu
15% (Nil for Tamil Films)
Assam, Himachal Pradesh, Jammu & Kashmir, Punjab and
Uttaranchal
Nil
Table 117
Service Tax under Pre-GST regime
Tax Rate
15%
Abatement
60%
Effective Rate
15% x 40% = 6%
Table 218
Total Tax under Pre-GST regime
VAT ( Assumed)
14.5%
Service Tax
6%
17
18
Entertainment Tax - Check Features & Tax Rates in Various States (bankbazaar.com)
Taxability & Impact of Media and Entertainment under GST (cleartax.in)
10
Total Tax
20.5%
Table 319
Taxation under GST regime20
Time of Supply for Services21
Time of supply of services is the earliest of the following:



Date of issue of invoice
Date of receipt of advance/payment.
Date of provision of services (if invoice is not issued within prescribed period)22
Time of Supply under Reverse Charge
In case of reverse charge, the time of supply for service receiver is the earliest of the following:


Date of payment (For services only)
30 days from date of issue of invoice for goods (60 days for services)23
Place of Supply
Place of Supply of Goods
 In case of sale of food & food products in a movie hall, the place of supply is the movie
hall itself.24
Place of Supply for Services
 Place of supply of services is the location of the service recipient.
 In cases where the services are provided to an unregistered dealer and their location is
not available, the location of the service provider will be the place of provision of
service.25
Place of Supply at Movie Halls
 Place of supply is place where the service are actually performed. i.e., movie hall
itself.26
Place of Supply in Events
Nature of Supply
Place of Supply
19
Taxability & Impact of Media and Entertainment under GST (cleartax.in)
Impact of GST on Entertainment services - Pioneer One Consulting LLP
21
GST on Entertainment Services - Taxmann Blog
22
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
23
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
24
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
25
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
26
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
20
11
Admission to an event or amusement park
or any other place. Services ancillary to
above27
Place where the event is held or place where the
amusement park is located28
Entertainment events
ancillary to the above29
Supply to: Registered person – Location of the
registered person Unregistered person – Location of
the event30.
and
services
Table 431
Value of Supply of Goods and/or Services
 The amount collected by the seller / service provider from the buyer or service recipient
respectively is the value of supply.32
GST on Online supplies of Digital Content (Music, Movies, Television Shows, etc.)
 Online supplies of Digital Content (Music, Movies, Television Shows, etc.) are known
as OIDAR i.e. Online Information Database Access and Retrieval services.33
Case 1: Both Service Supplier and Service Recipient are in India
GST @ 18% i.e. the Service Supplier should be registered in India and shall collect GST@
18% from the Service Recipient.34
Case 2: Service Supplier is outside India and Service Recipient is in India
Place of supply would be India The manner of levy of GST on such transactions would depend
on whether the Service Recipient is a Business or is a Consumer35 i.e. Non-Business.
II.
Service Recipient is a Business entity registered under GST
The service recipient is liable to tax under the Reverse Charge Mechanism
II. Service Recipient is not registered under GST
Service provider would also be required to get registered in India under the GST Law, collect
GST from the service recipient and then deposit GST with the Govt.36
Impact of GST on different activities in Media & Entertainment Industry
Exhibition of Movies
Pre-GST
GST
27
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
29
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
30
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
31
Taxability & Impact of Media and Entertainment under GST (cleartax.in)
32
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
33
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
34
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
35
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
36
https://google.com/url?sa=D&q=https%3A%2F%2Fwww.topcafirms.com%2Fwhite-paper%2F10161-allabout-gst-supply-services-right-to-broadcast-show-films
28
12
Sale of Movie tickets: No VAT or Service
Tax State specific Entertainment tax ranging from
15% to 110% (average of 30%)
Sale of Movie tickets: Where price of tickets is
Rs.100 or less : 18% GST Where price of tickets
is more than Rs.100 : 28% GST37
Television: No
VAT Service
Tax
@
15% Entertainment tax on broadcasting services
(D2H / Cable TV services) : 8-12%
Television: GST on broadcasting services (D2H
/ Cable TV services) : GST at 18%
No set off for Entertainment Tax against Service
Tax or VAT paid on procurements. Burden of taxes
ultimately on customer.
Authority given to local bodies to levy and
collect taxes on entertainment and amusement.
Table 538
IMPACT
Since entertainment tax was greater than the GST rate before, the overall tax burden on
consumers is expected to decrease. Since the amount of the entertainment tax is included in the
base value for the levy of GST39, the effect of the entertainment tax imposed by local bodies is
one of cascading taxes.
Food and Beverages at Movie Halls
Pre-GST
GST
Dual levy of VAT and Service
tax VAT @ 20.5% (Assumed) and
Service tax @ 15%
Supply of Food and Beverages at theaters is to be treated as
restaurant services GST rate of 18% in case of supply at A/c
counters and 12% at non- A/c counters40
Table 641
IMPACT
VAT & Service taxes subsumed under GST Reduced tax burden on end consumer Issues
regarding classification of an activity as a sale of goods or services42
37
38
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
Taxability & Impact of Media and Entertainment under GST (cleartax.in)
39
https://google.com/url?sa=D&q=https%3A%2F%2Fbooks.google.com%2Fbooks%3Fid%3Dyj1AEAAAQBAJ
%26pg%3DPT1539%26lpg%3DPT1539%26dq%3Dsince%2Bamount%2Bentertainment%2Btax%2Bincluded
%2Bbase%2Bvalue%2Blevy%2Bgst%2Beffect%2Bentertainment%2Btax%2Bimposed%2Bbodies%2Bcascadi
ng%2Btaxes%26source%3Dbl%26ots%3DYRa74dXqXG%26sig%3DACfU3U1eOcdtvMVqIjHGXbalLp7S8HFcA%26hl%3Den
40
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
41
Taxability & Impact of Media and Entertainment under GST (cleartax.in)
42
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
13
Film Distribution
Pre-GST
GST
Transfer of copyright for exhibition of movies in
Theatre: Service Tax on temporary transfer of
copyright relating to cinematograph films for
exhibition in a cinema hall or theatre. Increased
burden on producers on procurement of services for
service tax charged by actors, technicians etc.
Transfer of copyright for exhibition in
Theatre: Treated as supply of services GST rate
of 12%
Transfer of copyright for exhibition on
Television: Issue of dual levy of Service tax and
VAT on transfer of copyright for exhibition on
television due to confusion in classification of the
activity as a sale of goods or services
Transfer of copyright for exhibition in
Television: Treated as supply of services GST
rate of 12%
IPR such as trademarks, copyrights were also
treated as goods and attracted state VAT
Transfer of Intellectual Property (IP) right in
respect
of
Information
Technology
software: GST at the rate of 18% Transfer of
Intellectual Property (IP) right in respect of
goods other than Information Technology
software: GST at the rate of 12%
Table 743
IMPACT
No issue of dual levy of Service tax and VAT on transfer of copyright for exhibition on
television Reduced tax burden on Producers44
Services rendered by Artists and other technicians
Pre-GST
GST
Services rendered by Artists: Service tax @
15% on forward charge basis
Services rendered by Artists: GST @ 18% on
forward charge basis
Services rendered by technicians like
composers, photographers: Service tax @
15% on forward charge basis
Supply of services by an author, music composer,
photographer, artist or the like by way of transfer or
permitting the use of a copyright: 18% GST on
reverse charge basis
43
44
Taxability & Impact of Media and Entertainment under GST (cleartax.in)
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
14
Table 845
IMPACT
GST rate increase for services provided by artists While the cost on technicians, such as
musicians and photographers, is eliminated, the burden on producers has increased as a result
of the GST's reverse charge tax.46
Sponsorship and Brand Promotion
Pre-GST
GST
Liable to service tax @ 15%
Liable to GST @ 18%
Table 947
IMPACT
Increased tax rate under GST.
Advertisement
Pre-GST
GST
Print media: Exempt from service
tax Others: Service tax @ 15%
Print media: GST @ 5% Others: GST @ 18% Availability
of input tax credit on the taxes paid on the advertisements48
Table 1049
IMPACT
No tax exemption to print media. However input credit is available on services
received Increased tax rate under GST for advertisement media other than print media50
Amusement Parks
Pre-GST
GST
45
Taxability & Impact of Media and Entertainment under GST (cleartax.in)
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
47
Taxability & Impact of Media and Entertainment under GST (cleartax.in)
48
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
49
Taxability & Impact of Media and Entertainment under GST (cleartax.in)
50
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
46
15
State specific Entertainment tax ranging from 15% to 110% (average of 30%) No
VAT or Service Tax
GST
18%
Table 1151
IMPACT
States with high entertainment taxes will benefit from the GST. Unfavourable affect for states
with low entertainment taxes already negatively impact on building social infrastructure and
luring tourists to the nation. The removal of service tax and VAT from various transactions
and the application of GST throughout the supply chain should enable producers and studios
to offset the taxes, greatly lowering expenses.52
In conjunction to the GST, certain local governments, like those in Maharashtra, impose a
Local Bodies Entertainment Tax (LBET) that ranges from 10% to 25% on movies, cable TV,
and DTH services. If local governments continued to levy these additional taxes, which appear
to be a backdoor entertainment tax entrance, the operating margins and profitability for the
sector would decline, raising the cost to consumers. On a state-by-state basis, the entertainment
business has both significant and detrimental effects.
GST will be advantageous for those states with high entertainment taxes because it will lower
prices for final customers. GST will, however, be detrimental to jurisdictions with low
entertainment taxes currently in place. Overall, GST will support the industry's growth and
prosperity through increasing digitisation and more affordable access to data services.
Challenges faced and way forward
Due to its nature, the present dynamic of the entertainment tax, which was merged into the
goods and services tax, has sparked a lot of criticism. It is well known that the entertainment
business suffers from entertainment taxes. The entertainment sector has suffered significantly
as a result of COVID-19, particularly given the current change in dynamics.
That is not all, though. In Madhya Pradesh, many movie theatres went on strike in 2018. In
protest of the double taxation on movie tickets, more than 450 theatre owners in Madhya
Pradesh, including both multiplexes and independent theatres, have declared an indefinite
strike that began.53 The Central Cine Circuit Association and the Producers Guild of India have
51
Taxability & Impact of Media and Entertainment under GST (cleartax.in)
https://google.com/url?sa=D&q=https%3A%2F%2Fcleartax.in%2Fs%2Fmedia-entertainment-taxation-gst
53
https://google.com/url?sa=D&q=https%3A%2F%2Feconomictimes.indiatimes.com%2Fnews%2Fpoliticsand-nation%2Fover-450-cinemas-in-mp-go-on-strike-over-local-body-taxes%2Farticleshow%2F66095523.cms
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at
joined the strike, which was originally called by the Multiplex Association of India (MAI).54
The boycott is in response to a formal notice by the municipal corporations of Bhopal and
Indore that all films will be subject to a Local Body Entertainment Tax of up to 15% in Bhopal
and 5% in Indore.55 The 28% Goods and Services Tax (GST) on movie tickets is in addition to
these levies.
Even though Madhya Pradesh contributes only about 4% of the nation's total box office
receipts, this strike will significantly affect recently released movies like "Andhadhun,"
"Loveratri," and "Venom" (dubbed), as well as older movies like "Stree" and "Manmarziyaan,"
that were yet operating in the cinema halls in the state.
Madhya Pradesh has given local councils the authority to begin levying entertainment taxes in
addition to the GST, much like the governments of Rajasthan and Gujarat had done.56 This is
because state government entertainment charges have been incorporated into the GST.
All of the stakeholders have been burdened by an additional entertainment tax over and above
the GST, which has primarily benefited the States. The cost of performance tickets is a separate
expense for distributors and consumers. The ability of states to collect any form of indirect tax
has also been taken away by the GST. As a result, state governments must also make an attempt
to raise money on their own.
Conclusion:
GST has replaced a number of taxes, including VAT, service tax, and entertainment tax on
these entertainment services, and will instead apply a single GST rate. Both the entertainment
business and the final consumer now pay less in taxes thanks to the GST. However, it is
necessary to lower and harmonise the GST rates for theme parks with those for other forms of
entertainment.
Yet several governments, including Madhya Pradesh, Rajasthan, and Gujarat, have imposed an
external entertainment tax on the sector, harming both customers and distributors.
54
Over 450 cinemas in MP go on strike over local body taxes - The Economic Times (indiatimes.com)
https://google.com/url?sa=D&q=https%3A%2F%2Fm.economictimes.com%2Fnews%2Fpolitics-andnation%2Fover-450-cinemas-in-mp-go-on-strike-over-local-body-taxes%2Farticleshow%2F66095523.cms
56
https://google.com/url?sa=D&q=https%3A%2F%2Fm.economictimes.com%2Fnews%2Fpolitics-andnation%2Fover-450-cinemas-in-mp-go-on-strike-over-local-body-taxes%2Farticleshow%2F66095523.cms
55
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This table encapsulates the final tax rates that are applicable on entertainment post
implementation of GST from the month of July in 201757TYPE OF ENTERTAINMENT
GST RATE APPLICABLE
Circus
Theatre
Drama
Indian Classical dance inclusive of folk dance
18%
Movie
Cinema
Amusement
Race
Casino
Sport events such as IPL58
festivals
Parks
28%
Table 1259
The following is an illustration that uses a movie to explain how GST affects the final
consumer. Food and drink are subject to a 20.5% VAT tax in multiplexes or movie theatres,
while ticket prices often carry a 30% tax. Everything depends on the location where the
customer watches the film.
The rate of 28% GST is applied on movie tickets. Food and drinks are considered to be part of
outdoor catering and hence draw between 5 and 18% of customers. The GST rates for the
entertainment sector are therefore clearly lower than the VAT and Service Tax rates.60
Consequently, and subject to the state, GST has a variety of consequences on the entertainment
business. GST has proven advantageous for places where the entertainment tax was greater
than in other states because it lowers prices for the final consumer. States with low
entertainment taxes, on the other hand, see the opposite impact from GST.
Ergo, it can be said with assurance that GST has had a substantial impact on the whole of
entertainment business and has changed the dynamics of indirect taxation. In order to maximise
57
https://google.com/url?sa=D&q=https%3A%2F%2Fwww.coverfox.com%2Fpersonalfinance%2Ftax%2Fentertainment-tax%2F
58
https://google.com/url?sa=D&q=https%3A%2F%2Fwww.coverfox.com%2Fpersonalfinance%2Ftax%2Fentertainment-tax%2F
59
Entertainment Tax: Check Features, Tax Rates etc | Coverfox
60
https://www.coverfox.com/personal-finance/tax/goods-and-services-tax-gst/gst-rates-and-registration/
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the sector's utility and incentive, the states must be complacent and understanding of the needs
of its stakeholders. This will allow the business to continue operating without facing any
obstacles from the state and advance the laissez-faire concept in general.
Bibliography & References
1.
2.
3.
4.
5.
An Overview of Entertainment Tax in India; by Sujoy Ghosh:
Impact of GST Rates on Entertainment Tax; by S. Parihar
Taxation Defined, With Justifications and Types of Taxes (investopedia.com)
https://www.investopedia.com/terms/p/progressivetax.asp
Madhya Pradesh Entertainments Duty and Advertisements Tax Act, 1936, no. 30 of
1936, 1936MP30.pdf (blinkvisa.com)
6. Madhya Pradesh Entertainments Duty and Advertisements Tax Rules, 1942
7. Madhya Pradesh Cable Television Network (Exhibition) Rules, 1999,
http://www.bareactslive.com/MP/MP119.HTM#0
8. Indirect Tax: Definition, Meaning, and Common Examples (investopedia.com)
9. Georgia State University, Andrew Young School of Policy Studies. "Direct Versus
Indirect Taxation: Trends, Theory and Economic Significance," Pages 1-2.
10. Institute of Economic Affairs. "Aggressively Regressive: The 'Sin Taxes' That Make
the Poor Poorer," Pages 8-9.
11. Entertainment Tax - Check Features & Tax Rates in Various States (bankbazaar.com)
12. Taxability & Impact of Media and Entertainment under GST (cleartax.in)
13. Taxability & Impact of Media and Entertainment under GST (cleartax.in)
14. Impact of GST on Entertainment services - Pioneer One Consulting LLP
15. GST on Entertainment Services - Taxmann Blog
16. Taxability & Impact of Media and Entertainment under GST (cleartax.in)
17. Over 450 cinemas in MP go on strike over local body taxes - The Economic Times
(indiatimes.com)
18. Entertainment Tax: Check Features, Tax Rates etc | Coverfox
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