The Demonetization or Note Ban was a movement that was introduced in India during the 8th of November 2016 according to which the currencies that had larger monetary values such as Rs.1000 and Rs.500 was banned from existence and use of them was no longer legal. This act which came into existence overnight created a wave of shock as well as a surprise among people of the nation.
This movement was aimed at the following:
- To digitalize the transactions made even at the lowest possible levels.
- To bring out the wealth of the nation that are sleeping inside the country as black money, mainly in the denominations of 1000 and 500 rupee notes.
- To avoid corruption on the higher level.
How black many prevails inside Indian Film Industry:
Though Indian film Industry is considered to be one of the obvious places where the black money are dealt with in millions, during the demonetization none among from them seemed to affected by it. There was no dose of panic or breast-beating when the demonetization came into effect. That does not mean that people belonging to this film industry has clean hands. It was there but had already been converted into substantial capital holdings.
On visiting to any film production office, one can see a huge amount of voucher books lying around. The production managers of most of the people in the industry are a people in close associates who are capable of converting any amount of money from black to white and vice-versa.
Depending upon how famous they are and the salary they receive, the stars get these amount paid in various sources. The starts have been speculated to be receiving funds in the form of ‘Gold Guineas’, dubbing rights for various states or languages, in the form of real-estate bonds etc.,
The false vouchers for everything from fraud taxi bills, payments to junior artists that are over inflated and lunch bills for staffs who never exist, miscellaneous accounts, petrol charges for numerous cars, false hikes in production items and bills that are overstated from publicity and designs people. It goes on and on.
The number of voucher books used in a production unit is a good measure of the amount of black money paid to the stars. The smarter ones have their money invested in blue chips.
In Bombay there are around 150 of the agents and publicity people who make posters for inflated costs. For example, a banner or a poster which may cost around Rs.100 may be charged Rs.500 i.e. 5 times the price.
In the near present some people has started investing on the agriculture by some film bigwigs, since agricultural income is tax free.
But bribing has also been a problem for the big production houses. Since there is large money involved for big banner productions. Local politicians and local goons always have the practice of demanding money from these production houses. This could become a difficult task for the people to carry on after the demonetization and introduction of digital currencies.
Also the de-monetization did have immediate effects such as flop of some highly speculated films in the box office, other than this the industry did not see any more effects. Since the citizens were standing in bank queues rather than the theatre box-office. Also this was only for less amount in metro-Politian cities. The people used various digital currencies to pay for movie tickets.
But small production houses who used to pay money for daily wages for the employees were affected and the single screen owners who depended on daily box-office collection are the one who were most affected.
To conclude, demonetization did not have a much larger impact on cinema industry.
Actual GST Effect on Indian Cinema: Things
Goods and Services Tax as introduced by the present government has affected the Indian Economy in many ways. Goods and services which had lower tax rates have to pay higher common tax rates now, whereas those having higher tax rates have to pay nominal tax amounts now. It has unified the taxation across various industries. Let us consider one such industry called the Indian Film Industry which was already levied with high entertainment tax (in some places). The GST rates for buying cinema tickets are as follows:
- Tickets below Rs. 100 are levied with 18% GST.
- Tickets above Rs. 100 are levied with 28% GST.
This is a lot of amount that has been implemented by the government. Already, the Indian film industry is not receiving much profit for its smooth flow and such an implementation would further prove to be a loss for it. One advantage of the application of GST is that the entertainment tax would be removed. This is again beneficial for some states like Kerala which has around 25% tax and not for other states like Andhra Pradesh which has around 14% entertainment tax. It has been pointed out by the ministers that if GST is applied, then the public would have to pay the extra tax, otherwise it would become very difficult for the industry to survive in the long run. They have also submitted requests on the behalf of their states to the government informing them of the cons of application of GST.
In addition, equivalent ticket prices for all language films have been set by the government. On an average, we can say that the consumers have benefitted with the application of GST, since earlier they had to pay high entertainment tax and service tax. Now it has been simplified and curtailed as GST has rolled in. Theatrical rights and satellite rights also come under a lower tax rate than before, thereby helping the production houses and film producers, by reducing the amount for production. The members of the South Indian Film Chamber of Commerce were highly disheartened by the fact that films have been taxed at 28%, the highest tax slab in GST. And, that is really not fair. Apart from films, 28% tax has been levied on tobacco and betting products. This is further demoralizing for the film industry, to be rated equivalent to these products. In my opinion, this was done by the government because of the fact that a huge number of population goes out to watch films in theatres. The government saw this as an opportunity and made the full use of it by ‘28%’. Cinema has always been a great boost for the progressive nature of the country, by giving the world such talented Indians in this field. It is really shocking to see that rather assisting this sector to grow, the government is downgrading it. Another question that was raised was that why wasn’t any of the people of industry involved when the slabs for GST were being decided.
In terms of profit or loss of Bollywood through GST, we can say that it has been a grey area till now. Since the entertainment tax was highly variable before from 0% of the regional film industry to as much as 50% of highly grossing non-local films like Raees. Before its execution, GST was forecasted to provide the industry with very little profits in the mainstream line, and heavy losses in the regional line. For the latter, it definitely has been a matter of loss, but for the former part of the industry, it has been a boon in disguise. It is a disguise because earlier its long-term benefits were not considered. As we are moving forward with the running financial year, we can observe the profits earned by the Hindi film industry is growing and is expected to do so in the coming time as well.
Written by: Meher Tandon, Movie Analyst