The Hindu : Andhra Pradesh News : Sops to film industry will hit revenues

Online edition of India's National Newspaper
Sunday, Mar 27, 2005

Andhra Pradesh

Andhra Pradesh

Sops to film industry will hit revenues

By S. Nagesh Kumar

HYDERABAD, MARCH 26. A revenue loss of at least Rs. 15 crores annually is anticipated on account of the Government's decision to abolish the slab system for levying entertainment tax in cinema theatres in select cities and towns in the State.

At present, the Government is earning a revenue of around Rs. 84 crores from entertainment tax with almost the entire amount coming from cinema theatres. Due to poor compliance, entertainment tax on cable television collected by local bodies accounts for an insignificant amount of Rs. 1.25 crores.

With the Chief Minister, Y. S. Rajasekhara Reddy, announcing a slew of cuts in entertainment tax for dubbed films, Telugu films made in other States, classics and old movies and doing away the slab system in what the film industry calls "A, B and C'' centres, the entertainment tax collections during 2005-06 will plummet.

NTR's legacy

Although Government officials are unwilling to comment on these sops as the Assembly is in session, the main justification for scrapping the slab system, which was introduced by the NTR Government amid protests from film-makers, is the difficulty it has created for the film industry. As many as 412 cinema theatres had been forced to shut down since the slab system was introduced. While big banners/producers were largely unaffected by the slab system because they produce more number of hit films which run to full houses for a couple of weeks, the low budget films suffered as the exhibitors would pull out their films sooner. The collection of entertainment tax irrespective of the number of tickets sold was adversely impacting the film industry. Another reasoning is the experience in Tamil Nadu where the slab system was scrapped in September 2004 after being in force since 1980.

Dissenting note

However, not everyone in the industry is happy over scrapping the slab system. D. Suresh Babu, noted film producer, said while every other feature of the Government's package was welcome, the abolition of slab tax would prove costly for big producers. "Any movie that runs longer will end up paying more entertainment tax to Government and more maintenance money to the exhibitors," he added.

As the fall in entertainment tax revenue will affect the incomes of local bodies, the Government now plans effective steps to improve tax compliance by cable operators. "When a single South-based television company can collect Rs. 60 crores from the operators, when can't the municipal bodies and panchayats improve their performance?" a senior official asked.

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