MAHARASHTRA PROPOSES 4% SALES TAX ON FILMS

Industry moots strike as last resort
By MSM Desai
The film industry has strongly protested against the government of Maharashtra’s proposed bill imposing sales tax on transfer of rights in the case of sound recordings and cinematograph film with effect from May 1. Many producers including Rajshri Productions have received notices from the Sales Tax department asking them to cough up four per cent sales tax on all film and music deals.

It may be recalled that the Government of Maharashtra had withdrawn a similar sales tax it had imposed on film business in 1986, following the Godbole Committee’s recommendation, when the entire film industry went on an indefinite strike for over a month.

Pahlaj Nihalani, president of the Association of Motion Picture and TV Programme Producers, said the state Government had no moral right to reimpose the sales tax on film transactions when it had failed to curb copyright theft. "The film industry is losing crores of rupees due to the rampant piracy of the latest film releases on cable. Big budget films have been hit by low collections in theatres because of cable piracy, sometimes within a week of their premiere. Despite assurances from chief minister Vilasrao Deshmukh and deputy chief minister Chhagan Bhujbal, the government is yet to take any stringent measures to curb video piracy. Instead of helping the film industry fight the menace, it’s now seeking to add insult to injury by imposing a heavy dose of fresh taxation. It will adversely affect the very survival of the film industry," said Nihalani.

Nihalani added that the industry was negotiating with the government in an obvious bid to get the draconian tax withdrawn. "Failing these, we have no option but to resort to indefinite strike as we had done in 1986," he said.
Surinder Kapoor, president of the Film Producers Guild of India, said that the new government may not be aware that its predecessor in 1986 had withdrawn a similar tax on film business, on the industry’s collective protests. "We will discuss the implications of the new tax with not only all producers, distributors and exhibitors, but will also take precautions to protect the interest of the film industry. How can the government bring copyright within the meaning of goods and levies, by imposing sales tax at the rate of 4 per cent on sales of copyright? In the case of a cinematograph film, the tax will apply to every copy of the film, including photograph of any image, regardless of whether such copy has been sold or given on hire on earlier occasions. It will also affect all sale and hire of sound recordings," Kapoor lamented.

In other words, a producer has to pay 4 per cent sales tax on whatever amount contracted from distributors, irrespctive whether the film succeeds at the box-office or whether the distributors recover investments from theatres. While in the case of tangible goods, there is a definite sale, in the case of films, it is difficult to predict whether the film will recover investments for the producers, distributors and exhibitors. "Obviously, the government has not applied its mind on the issue, before announcing such a ridiculous tax on films," Kapoor pointed out.

NN Sippy, president of the Indian Motion Picture Distributors Association said the imposition of sales tax covering film business and film production would drive away Hindi film producers from Mumbai to Hyderabad or other havens wherever governments extend sops to filmmakers. "Already, a few producers are shooting in Hyderabad. Prints of films are also being taken outside Mumbai to save the high incidence of sales tax. Film industry will have to collectively oppose the tax as it had done in 1986, to make the government realise its folly," Sippy said.