What does it mean for a film to be declared tax-free?

Tax Free Wording & Calculator on Chalkboard

If a movie is declared  tax free it means the state has waived off the entertainment  tax.
Entertainment tax is similar to vat or service tax. And it is levied by state governments.  The  movie halls/producers collect the tax from movie goers and pay it government.

However this won’t have any impact on the normal movie ticket.

Suppose a ticket at chennai theatre costs you 120 inclusive of entertainment  tax. The theatre has to pay Rs.11 entertainment tax on each ticket sold to the government .

If a movie is exempt for entertainment  tax the owner can either pass on the benefit to customers by reduce the ticket cost 109 or add the Rs.11 to his profits by selling the ticket at same rs.120

How a Bollywood film becomes eligible for tax concession

Tax exemption is provided on the basis of the film’s subject, to ensure that the movie is seen by more people

The trend of tax-free films is not a recent phenomenon, but the manner in which, of late, tax exemptions are being granted is intriguing. As per experts, there are no set parameters. The onus is on the government to judge films based on the social and motivational message it conveys.

Why make movies tax-free? It helps only the filmmakers, not the society

Government don’t decide the market prices. It is the Market forces ( demand and supply ) which decides the market prices.
Even, if the movie got tax-free, then it is the distributors, production houses and most importantly, The Multiplexes decide the prices.

The price of a movie ticket would depend on what people are willing to pay. Tax free status are typically meant to INCREASE PROFITS of the movie makers (presumably because they made a movie that the state likes / thinks more should be made) but my sense is that tax free status has become a tool to score brownie points (besides having significant scope for corruption).


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