Budget 2013: Partial relief for film producers

01 Mar,2013

By Nandini Raghavendra & Maulik Vyas

 

So, what has celebrating a centenary of the Indian film industry got from the Finance Minister as a budget present? Some partial relief in terms of a small correction from last year’s budget. So far, non-theatrical revenues of a film like satellite and music and home video, were not in the tax net.

 

Now, they are. What does this mean?

 

“Producers and distributors will now be able to recover a portion of their input credits with this change, thus mitigating a portion of the adverse impact created by the complete exemption granted last year,” said Rakesh Jariwala, Tax Partner, Ernst & Young.

 

Dharma Productions COO, Apoorva Mehta, also welcomed this adding that this would bring some relief as satellite deals account bring in a significant amount helping the producer to off set cost to revenue. In fact, an international studio head not wanting to be quoted said, it would make at least a 7% difference, thereby bringing down the overall 12.33% cost addition.

 

The partial relief of service tax brings back all exploitation avenues, barring movie exhibitions in cinema halls, within the service tax net.

 

The move to restrict the exemption on the transfer of copyright in cinematographic films is a welcome move which addresses the anomaly created by the exemption granted last year.

 

This clarity will help movie makers and cinema halls since it will avoid double taxation to cinema halls. “Last year, at the request of the film industry, full exemption of service tax was granted on copyright on cinematography,” said the FM, in his budget speech.

 

“The industry has now requested to limit the benefit of exemption to films exhibited in cinema halls. I propose to accept the request.”

 

A fact, Rohan Shah, Managing Partner of Mumbai-based corporate law firm Economic Laws Practice says will help the around 11, 000 single screen theatres in India and the over 1,000 multiplex screens across the country, projected to grow to 1,600 by 2013.

 

“There was a significant sunk tax cost on taxes paid on input services consumed by production houses. By this latest amendment, the production house will be able to avail proportionate tax credits in relation to revenues generated through broadcasters and other avenues, other than theatrical release,” says Mr Shah, welcoming the measure of tax and credit efficiency which will benefit all production houses that have revenues generated from a variety of sources.

 

Source:The Economic Times

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