August 27, 2024
📰 FEATURE STORY
Is Karnataka’s decision to impose an entertainment cess the right approach?
The movie industry is filled with people who often don’t get the spotlight shone on them. We’re talking about those behind the camera who help assemble a production, which isn’t an easy task. They also certainly don’t get paid as much as those in front of the camera. The same goes for people in other art forms like theatre, where the money isn’t the same compared to movies and TV.
The Karnataka government decided to help them out. The state assembly passed the Cine and Cultural Activists (Welfare) Bill, which proposes a cess on entertainment options like movie tickets and OTT subscriptions. A 2% cess will be imposed to help generate money for the benefit of unorganised workers in the state’s movie and culture sector. Is this a good move?
Context
As it enters its 90th year, the Kannada film industry is in something of a crisis. The box office is dwindling, single-screen theatres are vanishing, and there’s increased competition from OTT players. Things were so bad that some even sought divine intervention by enlisting priests from the Karavali region to perform a puja. As Karnataka Film Artists’ Association (KFAA) secretary Rockline Venkatesh said, “When all else fails, it’s time to call the gods.”
Many ambitious big-budget movies aren’t performing well at the box office. Directors, actors, producers, and everyone else are worried. Some say it’s a supply and demand issue. Out of nearly 300 movies that hit the screens, only about 10 are a hit. Most of the releases in the first half of this year haven’t even made their money back.
According to some estimates, the Kannada film industry contributed to 8% of the Indian box office in 2022. That decreased to just 2% last year. While the pandemic certainly is to blame, the rise of OTT players has been a big factor.
Beyond the numbers, glitz, and glamour, thousands of people in the industry don’t have much of a safety net due to financial difficulties or health reasons. Many of these people earn a daily wage. While there have been schemes over the years, they haven’t trickled down to those who work behind the camera.
Included in the Bill passed by the assembly is setting up the Karnataka Cine and Cultural Activists Social Security and Welfare Fund to assist artists and cultural activities in the state. The Cine and Cultural Activists Welfare Cess imposed will help fill the Fund, collected by the government and transferred to the Karnataka Cine and Cultural Activists’ Welfare Board.
Cine and Cultural artists are defined as anyone employed as an artist, like an actor or musician, or any skilled, unskilled, supervisory, technical, or artistic role. While some have welcomed the government’s move, others are sceptical on whether it’ll work. Those in the distribution business are worried about the cost to pass on to consumers.
VIEW: It’s necessary
There are thousands of people employed in the state’s film industry who struggle to gain a footing and have to rely on government assistance. This is who the fund is aimed at. They don’t have contracts with studios and producers with big paychecks. They’re essentially daily wagers like dancers, spotters, make-up artists, costumers, stuntpersons, etc. There aren’t any robust welfare schemes for them.
Labour Minister Santosh Lad cited an example of an old woman who used to be a cine artist but didn’t have anyone to look after her and was low on money. For stuntpersons, whose jobs are risky, they’ll get financial help even for minor injuries, which wasn’t the case before when healthcare was only given for serious injuries. According to Lad, the Bill and the Fund will help nearly 70,000 workers engaged in the state’s cinema and cultural sector.
As far as the cess itself is concerned, it’s only about 1-2%. That comes to around 25 paise to ₹2 per ticket, which is nominal. Even though this will be passed onto consumers gradually, it won’t impact footfall for multiplexes. The same goes for OTT subscriptions. A reason why Karnataka made this move is perhaps the repeated concerns about not getting its share of tax revenue proportionate to its contributions toward the central exchequer.
COUNTERVIEW: Bad for everyone
While the intent behind the move – to ensure thousands of workers and artists are taken care of – is noble and necessary, this might not be the way to go about it. Perhaps the real motive isn’t welfare but a way for the state government to increase revenue since state governments aren’t mandated to split cess proceeds with the Centre. In this case, the entertainment and cultural sectors have become easy targets for the state.
The Bill doesn’t clarify the extent of revenue-generating activities subject to the cess. It states movie tickets, subscriptions, and “all other revenue”. Keeping it vague seems purposeful to help get multiple sources of revenue from businesses. Does this apply to the income generated by streamers from supplementary activities like fan events, licensing, etc.? Kerala had the Local Authorities Entertainment Tax (Amendment) Act 2013, which introduced a ₹3 cess on movie tickets. It failed due to online bookings.
This cess comes as theatres in the state struggle to bring in audiences. The promise of the GST was one tax across the country. They’re already paying 12-18% GST on the ticket prices. Apart from footfalls, the cess will impact consumers already dealing with dynamic ticket pricing and high food & beverage prices. For the state, the increase in revenue will be minimal at only about 0.03%. The Indian Broadcasting and Digital Foundation (IBDF) isn’t happy either. Broadcasters are already subject to 18% GST.
Reference Links:
- Puja, rituals, and prayers: Kannada cinema calls on the Gods as box office numbers dip – The Federal
- Karnataka nod to bill for welfare cess on movie tickets, OTT subscriptions but implementation unclear – Moneycontrol
- Karnataka likely to impose 1-2% cess on movie tickets, OTT subscriptions – The News Minute
- TV broadcasters express strong objection to Karnataka’s new entertainment cess – CNBC TV18
- Karnataka welfare fund will make entertainment more expensive. And stifle market – The Print
- Multiplex, OTT players wary of extra burden from Karnataka entertainment cess – Mint
What is your opinion on this?
(Only subscribers can participate in polls)
a) Karnataka’s decision to impose an entertainment cess is right.
b) Karnataka’s decision to impose an entertainment cess is wrong.
Previous poll’s results:
- The Supreme Court’s judgment on SC/ST subclassification is right: 66.7% 🏆
- The Supreme Court’s judgment on SC/ST subclassification is not right: 33.3%
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