Maharashtra's Proposed Entertainment Tax Increase Sparks Concerns Among Multiplexes

The Multiplex Association of India (MAI) is currently engaged in discussions with the Maharashtra government regarding a proposed substantial increase in the entertainment tax on cinema shows in Mumbai. The association has expressed concerns that this move could lead to higher ticket prices, reduced demand, and deter investments in new cinema screens.

Cinepolis India’s managing director, Devang Sampat, highlighted that the multiplex association, in collaboration with the producers' association, has formally requested the government to reconsider the tax hike proposal. The Brihanmumbai Municipal Corporation (BMC) has suggested raising the tax on air-conditioned cinema halls from Rs 60 to Rs 400 per show, representing an increase of approximately 567 percent. This proposal is pending approval from the state's urban development department, with current rates remaining in effect until any changes are officially announced.

Sampat noted that the tax increase is calculated on a per-show basis, which could impose a daily burden of Rs 1,700 for cinemas running five shows a day. This translates to around Rs 51,000 over a month, assuming the proposed increase applies to each show. The impact is expected to be particularly severe for screenings with low attendance, as the fixed tax must be paid regardless of ticket sales. He warned that exhibitors would likely need to pass some of these costs onto consumers, which could further complicate the pricing structure due to the industry's revenue-sharing model.

The potential rise in ticket prices could alter consumer behavior, making moviegoers more selective, especially for films with less audience appeal. This shift could influence the number of shows allocated to such films, ultimately affecting overall box office performance. The industry has been advocating for improvements in India's screen density, which remains low compared to other markets, and an additional tax burden could hinder future investments in new cinema screens.

Kamal Gianchandani, president of the Multiplex Association of India, has called on the state government to reconsider the proposed tax increase, emphasizing the need for a more favorable environment for consumers and the film industry. He pointed out that a fixed levy of Rs 400 per show would significantly strain the economics of cinema operations. Meanwhile, a related situation is unfolding in Karnataka, where a planned 2 percent cinema cess on tickets is currently under dispute, further complicating the landscape for exhibitors in the region.