Cinema houses in Puducherry battle changing trends and a tax disadvantage

The Hindu

8 hours ago

Puducherry's cinema theatre business, already battling for survival due to competition from local cable and OTT platforms on top of ever-rising overhead costs, nervously awaits the fallout of the lowering of entertainment tax in the neighbouring State of Tamil Nadu.
Sources in the industry said that at a time when the theatre business was already suffering from the anomaly of double-taxation in the form of GST and entertainment tax, Tamil Nadu's reduction of entertainment tax to 4% from 8% would aggravate the huge disparity with the entertainment sector in Puducherry where a 25% rate prevailed.
Theatre owners claim that while many States/local bodies have significantly reduced or eliminated entertainment tax after the introduction of GST, Puducherry still levied an 'unprecedentedly high rate' in addition to the standard 18% GST.
'However much Tamil film producers and distributors may see our market as vital for bringing in new releases, they have long grumbled, and not without basis, about how a net tax outgo of 43% was untenable as it resulted in shrinking margins from ticket sales here,' a theatre owner said.
Sources said whenever Tamil film producers-distributors mooted re-evaluating new releases in the Puducherry market, they were reassured that the government would soon respond sympathetically to the theatre owners' plea for lowering the tax.
'What has now accentuated the disparity in tax rates is the latest reduction of entertainment tax in Tamil Nadu. Our worst fear is that the Tamil film industry finally decides enough is enough and stops considering Puducherry as a market for new releases because of the prohibitive tax,' a theatre owner said
'As we are totally dependent on the neighbouring State for Tamil films, any drastic measure could lead to the collapse of the theatre business here,' he added.
Sources in government said that from an administration's viewpoint, foregoing revenue from cinema houses would be like chopping off an arm. Take the case of Pondicherry Municipality where entertainment tax was the fifth biggest revenue earner, after property tax, commercial rentals, professional tax and user charges.
During 2024-25, Pondicherry Municipality earned over ₹5.6 crore by way of entertainment tax from cinema theatres. During the last four years, including the Covid-impacted fiscal of 2021-22, the gross revenue from this source was to the tune of ₹18.5 crore.
'One needs to take into account the fact that civic bodies lack access to substantial government funds and have to heavily rely on mobilised revenue,' a Local Administration official said.
However, theatre owners said that while the State's need for own revenue in addition to its share from GST was understandable, levying a high entertainment tax rate could turn counterproductive, if unsustainable businesses shut shop.
'It would be ironical if it is eventually a high tax that serves the death blow on a sector that has historically been highly tax-compliant. The government has to take a call sooner than later on whether to compromise on the tax rate to sustain revenue or be left empty-handed if unsustainable cinema houses shut shop,' a spokesman for the theatre sector said.
Theatre proprietors also pointed to the trend of how over a decade or so several landmark theatres vanished from the cityscape, and gave way to hotels, textile shops or commercial complexes. As many as 20 cinema houses, including 14 in the heart of the city, many of which were release centres, have shut shop in the last decade. Even for the handful of theatres that stand, survival is challenged by factors like the dwindling viewer interest, piracy and release on OTT even before a good film has been allowed a full theatrical run, sources said.
'Our overheads are the same whether a film runs to a full house or partly-filled auditorium. In fact, we hear that a few suburban theatres have already cut down screening schedules to three days a week to save on overheads, especially the electricity expenses,' a spokesman said.
Meanwhile, an official said the onus was on the government to decide on rationalisation of entertainment tax. 'From a fiscal perspective, it is imperative that any lowering of tax concerning an important source of revenue for a civic body is offset by the government in some form,' the official said.