Films with entertainment tax benefit: tickets should be minus 30% ET component

CHENNAI: The Madras High Court today ruled that if a film is given entertainment tax benefit, ticket prices should be minus the 30 per cent ET component on admission fee and directed authorities concerned to pass necessary orders within four weeks.

So if the ticket rate is Rs 120, it is enough if a viewer pays Rs 94.3 in case of entertainment tax-exempted films.

Justice R Mahadevan, allowing a writ petition by one K J Saravanan, said it would be the responsibility of the Chief Secretary, the Home Secretary and the commercial tax department to ensure that the tax burden was not passed on to viewers in case of tax-exempted films. Necessary orders to this effect should be passed within four weeks, he said.

In Tamil Nadu, the cap on film ticket cost is Rs 120, which includes Rs one as maintenance charges and Rs 119 as admission rate. If the film is exempt from payment of ET besides Rs one as maintenance charges, only Rs 83.3 should be collected as admission fee, a saving of Rs 35.7.

Since July 2006, government has been granting tax exemption to films with Tamil titles and promoting Tamil culture besides avoiding violence and bloodshed. Hundreds of films have got the benefit but the full benefit of the exemption has not been passed on to viewers who continue to pay full rate for entry.

Saravanan submitted that in 1983 when 'Gandhi' was given tax exemption, the order specifically said special tickets must be printed indicating the reduced price and it should be sold only after getting a seal from the ET officer concerned.

However, on May 6, 2014 the present government issued a circular stating that theatre-owners should not collect ET from viewers in case of exempted movies and that it would be an offence to do so.

"The circular is purposely vague and ambiguous and does not clarify the real issues as to whether the admission fee fixed by the authorities is inclusive of entertainment tax or not," he argued.

It is illegal enrichment by theatre owners, he submitted.

Theatre-owners, however, claimed it was a state concession for promotion of business and trade in the film industry.

Justice Mahadevan rejected the contention that the orders of exemption are for the benefit of the industry and theatre- owners and not to be passed on to viewers.

The judge said collection and retention of tax against the provisions of law is unjustifiable and would amount to unjust enrichment. Once it is found that the tax is collected against the statute, it is liable to be refunded, he said.

He also ordered refund of Rs 107 collected as excess sum from Saravanan for three tickets.