Cinema-goers are in for a pleasant surprise as the Goods and Services Tax (GST) Council has taken a significant step to make the cinema experience more affordable. By reducing the service tax on food and beverages enjoyed within cinema halls from 18% to a mere 5%, the Council, under the leadership of the Union finance minister and representatives from states and UTs, has ensured that relishing popcorn and cold drinks at the movies won’t dent wallets as much.
This decision carries a substantial positive impact for both movie enthusiasts and the cinema industry itself. Particularly, multiplexes, which derive a substantial 35% of their earnings from this category, stand to benefit significantly from this favorable change. The move comes as a welcome respite, enabling multiplex operators to breathe new life into their businesses after the challenges posed by the pandemic.
The alignment of food and beverages under the ‘restaurant service’ definition for GST coverage at a flat rate of 5% (without the complexity of input tax credit) is a milestone welcomed by the entire cinema industry. A statement from the news agency PTI quoted industry insiders expressing their contentment with the resolution. It is anticipated that this clarification will usher in a sense of tax predictability, thereby mitigating the potential for disputes or litigation stemming from GST matters. This development, in turn, is poised to play a pivotal role in rejuvenating the theatre business, which has been striving for recovery post the pandemic.
The cinema exhibition sector encountered significant hardships due to the pandemic’s impact. The enforced closures throughout 2020 and subsequent resumptions under restrictions took a toll. However, the tide shifted in March 2022 as operations resumed at full capacity, and fresh content began to flow, rekindling hope within the industry.
In a parallel decision, the Council has also agreed to levy a 28% GST on online gaming, horse racing, and casinos, showcasing a diversified approach towards taxation.