Impact of Service Tax exemption on Indian Film Industry

Pranab Mukherjee
MUMBAI: The Union Budget 2012 presented by Finance Minister Pranab Mukherjee has turned out to be quite lacklustre. But for Bollywood, there is some good news. Celebrating the centenary year of the Indian film industry, Mukherjee announced that the entertainment industry will be exempt from service tax. Exemption will be applicable to copyrights relating to recording of cinematographic films as well. Investments in the media and entertainment sector will become attractive for venture capitalists because of the opening up of the venture capital sector. 
Chairman of Reliance Big Entertainment Amit Khanna says, “This was a media demand! We are happy that the entertainment industry will be exempted from service tax.”
The biggest points of concern for the industry had been levy of service tax and VAT on copyright acquired in content and levy of entertainment tax on film exhibition. Filmmaker Karan Johar, at the inaugural session of Federation of Indian Chambers of Commerce and Industry (FICCI) Frames, Mumbai had emphasised that the government needs to realise that the film industry actually works for the public. “Our base is becoming broader and we are also making social, economic and political changes by our cinema. So to recognize what we do is very critical”, he had said.
The film industry had planned a strike on 23 February this year to protest the 10.3% service levied by the government, but it was called off after a meeting between members of the film fraternity and Mukherjee, where they were suggested to wait for the budget announcement on 16 March.
So it looks like the fraternity’s concerns were heard and accounted for.
Vice President of Film Producer’s Guild Mukesh Bhatt has said “Exempting the film industry from the service tax is the best gift given by the finance minister. Had it been included, the entire industry would have been wiped out”. 
In the long run, the government’s announcement will mean that there will be improved cash flows and overall finances of the film sector.