Moneycontrol PRO
Open App

Budget 2022: Covid-hit theatre owners seek tax relief, capital support

A major expectation is a line of credit so that investments can be made in growth and a package to help sustain the exhibition business

January 27, 2022 / 06:49 PM IST
Down south, 70-year old Lakshmi Theatre and Shree Nagaraja theatre in Mysuru have been added to the list of theatres that are winding up operations. (Representative image)

Down south, 70-year old Lakshmi Theatre and Shree Nagaraja theatre in Mysuru have been added to the list of theatres that are winding up operations. (Representative image)

Theatre owners, one of the hardest hit due to the Covid-19 outbreak that led to months of cinema closures, want the government to provide them tax relief and capital support in the upcoming budget.

“We were the worst affected but somehow survived this situation,” Amit Sharma, MD of Miraj Cinemas, told Moneycontrol. “The problem now is growth capital and growth has been stagnant for the industry.”

While properties are available for acquisition, theatre owners are wary of adding screens due to the lack of capital.

“Developers are ready with many screens but they are lying in the market as there are no takers because none of the multiplexes has growth capital with them,” Sharma said. “Whatever money they had or had borrowed has gone in losses. Hence, the major expectation is to provide us a line of credit so that we can invest money in growth for the cinema exhibition industry.”

About 1,000 screens – about 10 percent of the pre-pandemic total – are estimated to have shut down permanently, while screen additions by multiplexes have slowed over the past two years due to the Covid-19 impact. Screen expansion will continue to be slow in FY22 with top multiplexes such as PVR and INOX expected to add 40-50 screens compared with 80-90 screens before the pandemic.

Exhibitors expect the budget to offer measures to help them launch more screens in India, which has a low count of about 8,000 screens.

Comparatively, there were about 40,000 screens in the US in 2020 and China led the market with 82,000 screens in 2021. 

GST holiday

Kailash Gupta, chief financial officer of INOX Leisure, said he expects a goods and services tax holiday for two to three years.

“This would reduce the stress… it would allow us to offer attractive ticket rates to our patrons, who are also looking for cheaper entertainment options after a prolonged financial stress,” Gupta said.

Movie tickets exceeding Rs 100 attract GST of 18 percent and those up to Rs 100 fall in the 12 percent tax bracket.

Prashant Kulkarni CMO, Carnival Group said that when standard operating procedures (SOPs) are planned to boost the retail sector, similar ones should apply to the cinema exhibition sector as well which is largely working on the retail format, of having to lease or own a place.

"As an immediate measure GST concession without having to pass it on to the customer will at least be a shot in the arm for the sector to have a quicker turn around and contribute to the over all recovery of the economy also," he added.

INOX's Gupta said that exhibitors hope for a comprehensive package similar to those doled out by governments in Europe for sectors like tourism.

“Such a package would not only ensure a speedy recovery of the sector, but will also lend strength and sustainability to the entire film industry,” he said. “A faster recovery of the cinema exhibition sector would bode well for the retail industry as well. Multiplexes operate on a capex-driven and labour-intensive model, and therefore a prolonged nil-revenue phase due to lockdown has created a threatening impact on the business.”

Last year, theatre owners urged the government to waive property tax and water tax for the period they were closed. This year, theatres are once again in a similar situation because of a dearth of content. At times, there is zero attendance at single-screen cinemas because Hindi movie releases have been postponed due to closure of theatres in New Delhi and parts of Haryana.

Single-screen exhibitors note that the money they made in the past few months was spent on fixed electricity charges, making it difficult for them to keep cinemas up and running. Electricity charges are a state subject. Last year, a film industry delegation met finance minister Nirmala Sitharaman to request a waiver of these charges.

Sharma of Miraj Cinemas expects a GST waiver on cinema equipment.

“A lot of the cinema equipment, sound systems and projectors fall in the 28 percent GST category and we pay a good amount of excise duty on importing these products. If we can have this equipment at a lower GST and no excise duty for a few years, then we can save some money in terms of growing the number of screens,” he said.

Theatres were closed for six to seven months in the first phase of the lockdown in 2020 and for four to five months in the second phase last year. Concerns over a possible third wave with the emergence of the Omicron variant have led states to allow most cinema halls to operate with restricted capacities and some to close. Maharashtra, which was the last to allow cinemas to reopen, saw the state’s cinema exhibition sector lose about Rs 4,800 crore after a series of lockdowns and restrictions since March 2020.

“Theatres have either been closed or are operating at partial capacity, as per applicable regulations,” said Anand Desai, managing partner at DSK Legal. “Unemployment in the industry is rampant. Incentives to revive the industry including inward investment and tax reliefs would help.”
Maryam Farooqui
first published: Jan 25, 2022 06:47 pm
ISO 27001 - BSI Assurance Mark