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PVR Chairman Ajay Bijli pens down his views on the GST and its impending effect on cinemas.A key stakeholder in the Indian film industry — the government — got its script wrong by imposing such a damagingly high GST rate on cinemas.The GST was a great opportunity to take the film industry — the staple and most innocuous form of entertainment of the Indian masses — to another level. In the near term itself, we would have come at par, if not above, than the best in the world, both in quality and quantity.It was an opportunity to scale up our domestic box office, which, at present, is a dismal size compared to ones in the US, China and even smaller markets. Through GST, we could have screens in every nook and corner of India.Let me explain why I feel a perfect platform that was set for an exponential growth in the sector has now got adversely impacted.I have been in the business of running cinemas for over 27 years and have experienced from up close the dynamics of the film industry in our country.For several years, the entertainment tax regime in India has been disproportionately high, ranging from 20 per cent to 60 per cent. In addition, most states also capped ticket prices. As a result, there was little incentive for the already fragmented cinema halls to improve their offerings.The problem multiplied in the mid-80s with the video boom, with hundreds of cinemas closing down because of non-viability.People reduced their visits to the cinemas due to the novelty factor of watching movies on video. Plus, it didn’t help that theatres hadn’t upgraded their infrastructure. Overall, cinema owners were finding it difficult to keep the ship afloat.However, two things that are unique to India and critical for the industry to succeed remained encouraging — an abundant supply of films and consumers’ demand.The Indian film industry was still churning out the highest number of movies in the world and people here had an insatiable appetite to watch them. The missing link, however, was the conduit that connected the two — a retail infrastructure that was clean and hygienic with modern technology.The exhibition sector needed a boost, as the revival of cinemas was important to resuscitate the industry. For this to happen, taxes had to be rationalised, land had to be provided for cinemas, and ticketing had to be decontrolled. And all this could be done only by the third stakeholder in the business — the government.Since 1990, various cinema associations have made representations to their respective state administrators, requesting for decontrolling of ticket prices (partial or full), reduction/exemption of entertainment tax (which was different in every state) and to tender or auction land demarcated for cinemas. It was important that the land wasn’t meant for general commercial use as these could be grabbed by real estate players.Various state governments understood the issue and the industry tasted some success. A big concern for Delhi was the transparency at the box office where tickets are sold. Some stalwarts argued that the high tax rate was owing to the manual ticketing systems. As a result, in 1995, we received permission to build the first multiplex with updated cinema building by-laws. We introduced computerised ticketing systems that ensured transparency for all — producers, exhibitors, state exchequer and consumers.This was accompanied by partial decontrol in ticket prices and some reduction in entertainment tax at the state level. The first multiplex opened in 1997 and was a huge success.Everyone benefited — the consumer now had a world-class facility to experience his favourite pastime, entertainment tax collections increased despite lowering of tax, the box office revenues increased and the adjacent real estate became prime. Seeing this, other state governments started giving tax exemptions — although for a limited period.The next two decades saw gradual growth. But the growth rate was nothing compared to the US and China. Still, we were finally moving in the right direction.Cut to the current scenario. We are now facing an onslaught of piracy, consumers watching films on handheld devices, and other forms of out-of-home entertainment. The one impetus the industry needed was a palatable GST regime. In fact, because entertainment tax has always been a state subject and some of the governments have an abysmally low price cap, the GST regime was the only ray of hope for the industry.One has to understand that the industry has also survived so far because of its pan-India multi-state approach. Films are released country-wide and exhibition chains are spread across India. If we were to be regional or stick to one state, then any adverse change in the tax regime could topple the entire industry. Everyone has been keeping the ship afloat by defraying its risks in various states.An acceptable GST rate would have brought parity and removed the volatility we have faced over the years. World over, cinemas are hardly taxed more than in single-digit rates. This has helped the cinema industry in these countries to plough back the money into high quality and globally appealing movies.India has the talent to make movies that can woo not just Indians to the theatres, but a worldwide audience. We could have fast-tracked our screen growth, which is the lowest in the world. We have 2,000 multiplex screens and 6,000 single screens, compared to over 30,000 each in the US and China.In addition to the economic reasons, I also have an emotional issue with the GST slab. Why are we being clubbed with casinos and betting, and revolvers and pistols? Is watching a movie akin to gambling? Is the government trying to encourage cinemas, which are embedded in the social fabric of our country, or discouraging them? This high-tax bracket also applies to luxury goods and services. Last year, 2.7 billion tickets were sold at an average ticket price of less than `80. Cinema isn’t a luxury, it’s entertainment for the masses. In one of his talks, Clint Eastwood said that cinema is an emotional art form. Therefore, this step is a huge setback. While we have the maturity of being pragmatic, we do feel let down by this categorisation.