Cinema is sacrosanct in South India, and movie ticket prices even more so. This is why Tamil Nadu is in a weird quandary, and is observing a temporary ban on new releases until issues created by the imposition of the Goods and Services Tax are ironed out.

Maintaining a cap on ticket prices is a pan-south Indian phenomenon and has been historically a politically sensitive issue. Yet, film industries in the South had warily begun debating increasing the ticket prices of regional films to match the new slabs mandated by GST from July 1. The new tax has put films in the 18-28% bracket chargeable on ticket prices across the country. Tamil Nadu finds itself grappling with an additional tax thanks to its state government. Contrary to the ‘One nation, one tax’ rule, Edappadi Palaniswamy’s government imposed an additional local tax of 30% on cinema halls. Between GST and the local tax, the levels in Tamil Nadu have swelled to 5%, the highest in any state in the country.

The question is whether ticket prices in a state known for its fiercely protectionist policies will have no choice but be raised. “Maybe they will, maybe they won’t,” Abirami Ramanathan, president of the Tamil Nadu Film Chamber of Commerce, told The chamber is hoping that the state government will scrap the local tax instead.

At least 1,060 screens in Tamil Nadu have been shut after the Tamil Nadu Film Chamber of Commerce called for a shutdown on July 3. “We welcome a common tax for the country, what we are against is the 30% local body tax,” Archana Kalpathi, CEO, AGS Cinemas told The Hindu. “Since we have a cap on ticket prices, we cannot pass on the taxes to the public. If theatres have to pay tax from the movie ticket, it reduces the producers’ and the distributors’ share considerably. Such a high tax is a huge blow.”

In a statement, actor and producer Kamal Haasan criticised the Tamil Nadu government, accusing it of making filmmaking impossible. “Neighbouring states like Kerala have totally desisted from levying anymore state tax on Cinema over and above GST,” Haasan pointed out. “The film industry requested the CM of Kerala Mr. Pinarayi Vijayan and he through his Finance minister quickly announced that Kerala will not be levying anymore taxes on the already beleaguered film business. Karnataka has gone even further to facilitate the well being of the film Industry. Telangana and Andhra are also doing their best for their film industries. It is only Tamil Nadu Govt. That has brought it to 30%.”

Haasan is partly right in observing that other southern states are not levying an additional tax. Yet, each of them is grappling with the consequences of GST on regional cinema. Nobody wants higher ticket rates, especially in Tamil Nadu, Karnataka or Telangana which have historically enjoyed low prices thanks to their respective governments.

Under GST, the entertainment tax exemptions given for local language cinemas in the south stands cancelled. This means that cine-goers will have to pay more than before to watch Kannada films in theatres in Karnataka, for example. The same situation prevails in Tamil Nadu and Telangana.

To raise or not to raise?

Even before the additional tax, the ticket price cap was already being debated in Tamil Nadu. Producers and exhibitors had already begun debating increasing ticket prices from July 1. Before GST, ticket prices were capped at Rs 50 for single screens and Rs 120 for multiplexes with three or more screens. Entertainment tax ranging anywhere between 20-30% based on location was included in this price. Exhibitors quoted in a report in The Hindu felt that after July 1, Rs 120 would be treated as base fare and GST would be an additional charge, hence raising prices of tickets to around Rs 150.

When it was announced that the rates for Telugu films would be hiked after GST, the office bearers of the Telugu Film Chamber of Commerce met Minister Talasani Srinivas Yadav to request him to roll back the order. Cinema is a common person’s source of entertainment, they said.

A cap on ticket prices is part of a series of protectionist measures introduced by states in the South to protect local produce from being gobbled up by Hindi cinema. In one form or the other, it is currently in practice in Tamil Nadu, Telangana and more recently, Karnataka. The logic behind the move is that lower ticket prices will increase footfalls at theatres and keep films affordable.

Karnataka recently capped tickets at Rs 200 exclusive of taxes. Before this happened, Bengaluru charged the highest prices for movie tickets in all of South India. “The state government was under pressure from Kannada organisations to cap movie tickets in multiplexes to Rs 200 so that a common man can afford to watch Kannada or non-Kannada films even in the luxury of a multiplex in the state,” said a Business Standard report. Shortly after the rule was implemented, the Multiplex Association of India urged the government to lift the price cap. A report in Firstpost quoted Deepak Ashar, the president of the association, as saying that the rule was “not investor friendly”.

“We urge the Karnataka government to withdraw its notification on capping movie tickets in theatres and multiplexes across the state, as it is not investor friendly and against the interests of the film industry,” Ashar said. In Tamil Nadu too, theatre owners have been complaining that lower ticket prices have meant low rates of recovery at the box office.

However, the governments of Tamil Nadu, Telangana and Karnataka have stuck to their commitment to curb the rise of ticket prices. If the M Karunanidhi government introduced a 30% exemption for movies with Tamil titles, the Jayalalithaa government introduced further exemptions. Telugu filmmakers too have enjoyed tax breaks from successive governments for films shot in the state.

In Karnataka, exemptions have been so common that the film industry is now asking the state government to reimburse its share of the tax.

The Goods and Service Tax is threatening this resolve. If the burden isn’t shifted to the consumer or shouldered by the government, the local film industries will stage further agitations. If the burden is indeed shifted and the ticket prices go up, the states may be perceived as anti-populist.