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Entertainment Tax in India | Applicability, Impact and Features

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The entertainment industry plays a significant part in the Indian economy. This sector alone employs millions of people and contributes billions to the Indian GDP. For strategic growth in this sector, the government of India decided to place an entertainment tax and various other regulations. Entertainment tax which is sometimes referred to as “amusement tax” is a tax levied on any form involving commercial entertainment, such as exhibitions, movie tickets, sports events and more. 

The rules like the tax rate of entertainment tax and cases involving tax exemption are subject to local authorities, as is the collection of the same. The entertainment tax is mostly in the form of indirect tax, which is generally levied on buyers. Nowadays, the most discussed subject of taxes is their implementation in online services, most importantly the ones performing on a streaming basis, for example, Spotify, Netflix, and others. In this article, we will learn about GST on entertainment, entertainment expenses deductible and ideas related to them. 

Did you know? Article 246 of the Indian constitution lists down all rules and guidelines that are applicable to the entertainment tax in India.

Entertainment Tax in India

Taxation is an essential feature of the governance model of our country. Different taxes can be applied to goods and services, bought and sold by enterprises or individuals. Both individual income and industrial income are eligible for taxation in India. This tax is categorised under the indirect tax. However, the entertainment tax has been substituted by the GST or Goods and Services Tax from 1st July 2017. 

Also Read: Difference Between Interstate GST and Intrastate Supply Under GST Explained

Features of Entertainment Tax in India  

Entertainment tax is a tax levied by the Government on movie tickets, commercial shows, music festivals, sporting events, amusement parks, theatre shows, exhibitions and various private festivals. It is variable from state to state. Some of the key features of entertainment tax in India are:

  1. Rate of tax: 

The rate of entertainment tax varies depending on the type of entertainment and the location of the event. For example, the rate of entertainment tax on tickets for events held in non-air conditioned theatres is 28%, while the rate for tickets for events held in air-conditioned theatres is 18%.

  1. Scope of tax: 

Entertainment tax is levied on tickets for events, shows, and movies, but not on other items, such as food and beverages, that may be sold at the event. These items are subject to GST at the applicable rate, which is usually 18%.

  1. Exemptions: 

Some types of entertainment may be exempt from entertainment tax, such as cultural events and events organised by charitable organisations.

  1. Collection and enforcement: 

Entertainment tax is collected by the state government, and enforcement is typically carried out by local tax authorities.

  1. Appeal process: 

If a person or entity disagrees with a decision regarding the assessment or collection of entertainment tax, they may have the right to appeal the decision to a higher authority.

Also Read: Blocked Credit Under Gst – Things you need to know about blocked credit in GST

When Does the Entertainment Tax Apply?

The entertainment tax was first introduced during British rule in India, with the intention to curb public gatherings. This system, however, continued in the post-independence era as well and is still prevalent in all states of our country. Even now, the entertainment tax is applied in the following places:

  • Exhibition
  • Amusement parks
  • Activities related to sports
  • Arcades
  • Theatre Shows
  • Video Games
  • Celebrity Stage Shows

GST on Entertainment Tax

There is no current separate levy of entertainment tax in India. Some Indian states, however, have decided to levy additional charges on top of GST which is referred to as the entertainment taxes. The states levying these additional charges are Assam, Kerala, Bihar, Madya Pradesh, Odisha, Maharashtra, Telangana, Tamil Nadu and West Bengal.

In India, the GST on entertainment tax is levied at the rate of 18%. This applies to tickets for events, shows, and movies. However, the GST rate may vary depending on the type of entertainment and the location of the event. For example, the GST rate on tickets for events held in non-air conditioned theaters is 28%, while the rate for tickets for events held in air-conditioned theaters is 18%.

It is important to note that the GST on entertainment tax is only applicable to the sale of tickets for events, and not to the sale of other items, such as food and beverages, that may be sold at the event. These items are subject to GST at the applicable rate, which is usually 18%.

Highest Tax Paying Sector in India

The extra tax that is levied by a few Indian states on top of GST lies in the range of 20-30%. The total tax comprised of the GST and the additional tax on entertainment activities in all states ranges between 38-48%. This increase in taxes makes the entertainment sector the highest tax-paying sector in India. 

However, the additional state-levied taxes are not necessarily uniform. For example, in West Bengal, the tax on theatre tickets is 30% while in Bihar it is 50%. Similarly, in Madhya Pradesh, the tax on theatre tickets is 25% while in Kerala, it is 20%.

Also Read: GST Registration Limits – Increased GST Registration Threshold Limits | Explained

Entertainment Tax Rates in Indian States 

Entertainment taxes are calculated by the state governments in India. This is the main reason behind the difference in entertainment tax rates in various Indian states. The following table has listed the widespread differences in the entertainment tax rates in major Indian states.

 

Name of State

Tax Rate

Maharashtra

45% (Nil for Marathi films)

Karnataka

30% (Nil for Kannada films)

Uttar Pradesh

60%

Kerala

30%

Haryana

30%

West Bengal

30% (2% for Bengali films)

Bihar

50%

Orissa

25%

Jharkhand

110% (Nil for Jharkhand films)

Delhi

20%

Orissa

25%

MP

20%

Andhra Pradesh

20% (15% for Telegu films)

Gujarat

20%

Assam

20% for tickets costing anything above ₹20 and 15% for tickets costing less than ₹20

Rajasthan

30% (Nil for Rajasthani Films)

Tamil Nadu

15% (All Tamil films are tax-free in Tamil Nadu)

Himachal Pradesh

0%

Jammu & Kashmir

0%

Punjab

0%

As mentioned in the table above, it is observed that India charges a high tax incidence on entertainment activities. That is why these activities often become unaffordable to the majority of the population. There is a necessity to rationalize these entertainment expenses as tax-deductible and reduce them to a reasonable level. This will facilitate the overall economic growth of the entertainment sector and will bring a sigh of relief to the consumers. 

Service Tax Under Pre-GST Regime

Tax Rate

15%

Abatement

60%

Effective Rate

15% x 40% = 6%

Total Tax Under Pre-GST Regime 

VAT (Assumed)

14.5%

Service Tax

6%

Total Tax

20.5%

Impact of the GST Rates on the Entertainment Sector 

Know the final tax rates which are applicable to different types of entertainment post-implementation of the Goods and Services Tax from July 2017-

Types of Entertainment

Applicable GST Rate

Theatre

Circus

Indian Classical dance inclusive of folk dance

Drama

18%

Movie festivals

Amusement Parks

Cinema

Casino

Race

Sports events such as IPL

28%

Impact of GST on Customers 

To understand the possible impact of GST on the customer, we will provide an example involving movies. The GST has replaced a number of indirect taxes, such as value-added tax (VAT), central sales tax (CST), and service tax, which were previously levied on goods and services. The GST has resulted in the overall simplification of the tax structure and has reduced the tax burden on many goods and services. As a result, the prices of many goods and services have either remained unchanged or have decreased under GST. 

Overall, GST affects the entertainment industry in numerous ways varying from one state to another. In states with higher entertainment taxes than others, GST is beneficial, since it reduces the prices for the customers. On the contrary, GST has an inverse effect on states with low entertainment taxes. 

Conclusion

The entertainment expenses deductible is an ever-changing complex topic in  India. The current GST rate for entertainment is 18%. You need to stay updated about the changes in entertainment tax law since the rates can vary on the entertainment type. The introduction of GST made the procedure of entertainment tax payment much simpler and well-organised. However, it is important to stay aware of the rates and their possible changes in the future. Hopefully, this article has successfully guided you about entertainment tax, entertainment expenses tax-deductible, and more. 

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