Every year, several films are declared tax-free by some state(s). In the past, some films have had eight to nine states declaring them tax-free. But what does that really mean – for the cinemas and for moviegoers?
Niharika Lal (BOMBAY TIMES; May 16, 2023)

HOW MUCH CHEAPER IS YOUR TAX-FREE TICKET?
In December 2018, two GST slabs were announced for films – 18% for tickets above Rs. 100, and 12% for tickets below Rs. 100. This tax is divided between the state and central government (State GST and Central GST). When a state declares a film ‘tax-free’, it exempts half of the entertainment tax, which would be either 9% or 6%, as per the ticket price. For the multiplex audience, since there are hardly any tickets available below Rs. 100, the default exemption would be 9%.

TAX-FREE STATUS HAD A BIGGER IMPACT IN THE PRE-GST ERA
Cinema hall owners say that declaring a film tax-free had a bigger impact in the pre-GST years, when every state had different entertainment tax and the state governments could exempt the whole amount. Now, with GST in play, a moviegoer still needs to pay Central GST even for tax-exempted films.


‘TAX-FREE EXEMPTION DECLARATIONS CREATE AWARENESS ABOUT A FILM’
Rajender Singh Jyala, Chief Programming Officer PVR INOX Limited, says, “Whether a film will perform better after tax exemption largely depends upon its content. For a moviegoer, tax-exempted tickets used to be cheaper in the pre-GST era. Now, when a film is declared tax-free (it is more about that) it creates awareness about the film among the audience. Hence, even if the film is declared tax-free in only one or two states, the film performs well in other states too.”

‘IT WORKS AS A PUBLICITY TOOL AND INCREASES LONGEVITY IN THEATRES’
Producer Girish Johar, several of whose films were declared tax-free in pre-GST years, says, “There are three reasons why producers want their films to be declared tax-free. First, it lures moviegoers to watch a film, second, it works as a publicity and marketing tool because a state government is endorsing your film; and third, the film gets longevity and instead of four weeks, it may end up getting eight weeks in the cinema hall.”

WHAT MAKES A FILM ELIGIBLE TO BE TAX-FREE?
There’s no fixed criteria for a film to claim exemption. Usually, socially relevant films or inspiring stories are made tax-free. From films on issues, such as Toilet: Ek Prem Katha, Chhapaak and Hindi Medium, to biopics like Mary Kom and historical films like Tanhaji: The Unsung Warrior have been declared tax-free over the years.

Sometimes states also declare films tax-free to show solidarity with its theme and in some cases producers apply for a tax-free status. In their film policy, some states have the provision of declaring a film tax-free when a certain portion of a film is shot in the state. Overall the decision resides with the state government.