Our industry is family-oriented, non-alcoholic, mass market one: Ajay Bijli

PVR Chairman Ajay Bijli said that there is a huge diversity in entertainment taxes levied in India

Last week, the tax on film tickets was fixed at 28 per cent and on food and beverages at 18 per cent by the GST Council. These are way above the 12-18 per cent the sector had lobbied for.  Ajay Bijli, chairman PVR Cinemas and a member of the Multiplex Association of India (MAI) spoke to Vanita Kohli-Khandekar on the association’s reaction. Edited excerpts:

What is the net impact at 28 per cent?

There is a lot of diversity in the entertainment taxes levied across the country. It is 20-45 per cent. In some states like Jharkhand, it is a fixed Rs 25,000 per week. At 18 per cent GST, the blended tax would have been just under the blended entertainment tax (average 20 per cent) that we already pay as an industry. (The average only for multiplexes, which are one-fourth all screens in India, is 26-27 per cent)

At 28 per cent, the impact will differ from state to state and also on where the screens of an operator are concentrated. (In an analysis of 20 states and Union Territories by the MAI, the impact of 28 per cent on tickets will be negative in 12 states, neutral in one and positive in seven. The 18 per cent on F&B will be negative throughout since the earlier value added tax (VAT) was 12.5 per cent). For a smaller player with, say, 100 screens in Andhra Pradesh, the rise in taxes from 20 to 28 per cent will mean lower margins. In some markets like Punjab where entertainment tax is zero, we can’t pass on the cost to consumers since the market is very sensitive to pricing. It wouldn’t be able to take the sudden rise in ticket prices because of GST. In other states, there is still the spectre of local body taxes. For example in Maharashtra, where the entertainment tax is 40 per cent, GST will be 28 per cent. So, the net impact is positive. But if the local body taxes increase, it is negative. Across the developed world, the GST rate ranges from 3-10 per cent on cinema tickets. 

Within the 29 states of India, there is disparity in spread of cinemas. Given that, 12 per cent would have been brilliant and 18 per cent would have given us breathing space. Where 28 per cent comes in is not clear. And, how are we getting clubbed with betting and gambling? We are a family-oriented, non-alcoholic industry. 

The perception is that multiplexes charge a lot of money and that prices are rising… 

The industry sold 2.7 billion tickets last year. So, it is a mass market industry; not a luxury one. Of the 8,000,000 installed seats in India, only a thousand are at over Rs 500. So, even if the perception is that multiplex tickets are sold at more than Rs 500, all seats are not over Rs 500. The national average ticket price in India is Rs 80. (Most multiplexes average between Rs 160 and Rs 180 per ticket and single screens between Rs 50 and Rs 120). 

What does 28 per cent mean for screen growth?

We were very excited about the GST regime coming in. It was a golden opportunity for us to go to another level and create more Dangals and Baahubalis. India is grossly under-screened. A 12-18 per cent GST would have given the multiplex industry the flexibility to plough back money into screens and content. China and the US, for instance, have zero entertainment tax. There is a controlled development happening in China and Korea. They have brought taxes down on import of equipment. China is adding 3,000 screens a year. GST was a great opportunity to grow the exhibition sector. (Because of real estate costs) We're already struggling to open 250-300 screens as an industry; at 28 per cent, there will be a slowdown of investment in new properties.