Christmas comes early for cinemagoers

Christmas arrived early this year for cinemagoers in the country as the government on Saturday reduced the goods and services tax (GST) on movie tickets.

In its latest decision, the GST Council reduced GST rates on cinema tickets costing up to ₹100 to 12%, from 18%. And for tickets exceeding ₹100, the GST has been revised to 18%, from 28%.

This was part of a revised tax scheme on 23 goods and services which are showing a positive impact in many industries, including movies, TV, and monitor screens.

The stock markets responded well. Both PVR Cinemas and Inox Leisure performed well on Monday. The Inox Leisure stock gained 3.39% to close the day at ₹247.10; however, the PVR Cinemas stock failed to hold the early gains, closing the day at ₹1,544.10, nearly 1.17% lower than its previous close on the BSE. On Monday, the benchmark BSE Sensex closed 271.92 points, or 0.76%, down at 35,470.15.

The government's decision to reduce the GST on cinema tickets, according to the Multiplex Association of India (MAI), would make movie viewing more affordable and help increase footfall, aiding growth. "Lower ticket prices would attract more people to cinemas, which means more footfalls and our occupancy level would go up,” MAI president Deepak Asher said in a statement.

Cinema exhibitors, too, have welcomed the move as after much lobbying, the industry was finally relieved of the ‘sin’ or luxury tax category. “We welcome this announcement... this will give an impetus to the Indian film industry. This will ensure penetration of multiplexes more in smaller towns and the real Bharat,” said Alok Tandon, CEO, Inox Leisure.

According to experts, this move will not only reduce the cost of watching a movie in a theatre for audiences, but also make it viable for cinema exhibitors to run their businesses. Karan Taurani, vice president-research (media), Elara Capital, said for multiplex chains like PVR and Inox this will have a positive impact as it will reduce their tax burden since more than 95% of their tickets are priced above ₹100.

“We believe the entire positive impact of this will be passed on immediately to consumers. It should benefit footfall in a positive way—specifically in smaller markets which are price-sensitive. This move will also be a positive for single-screen occupancy and smaller multiplex chains, which are extremely price-sensitive markets,” Taurani said.

Elara Capital expects this move to have a positive impact of almost 200-250 basis points on the Ebitda margins of cinema exhibitors.