Indian minister: Tax rate cuts could boost film biz

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NEW DELHI -- India should consider reducing its entertainment tax rate to boost the film exhibition business and counter piracy, Information and Broadcasting Minister Priya Ranjan Dasmunsi told state ministers this week.

The current entertainment taxes set by Indian states average 50% and need to be cut in half to about 25%-30%, Dasmunsi said at the conclusion of a ministers conference in the capital late Wednesday.

"While the entertainment tax on the film industry has gradually been reduced from 75% to an average of about 50%, we have been recommending further reduction," he said. "This will give a boost to the exhibition sector, and reduction of ticket rates would encourage more viewership."

Dasmunsi said a standard tax rate needs to be established nationwide, though he did not set a timeline.

Industry observers welcomed the proposal.

"If the government actually delivers on its promise, then they would have addressed a long-standing demand of the industry," said Tushar Dhingra, chief operating officer of Mumbai-based Adlabs Films, India's largest theater chain with 102 screens.

Reducing the entertainment tax could drive ticket prices, now averaging 100 Rupees ($2.50), below the typical cost of pirated DVDs, which sell here for about $2.00-$3.00.

"The exact benefits will only be clear once the reduced rates are implemented," Dhingra said, adding that, if the tax was cut, an increase in admissions "could well make up for the government's overall tax collection despite reducing the rate."

As a boost to establish new cinemas, Dasmunsi said that states also need to streamline licensing and clearance procedures that have "not kept pace with the changing environment and technology."
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