GST rate cuts give partial relief to cinemas, OTT gets no concessions
The cost of consumer electronics like TVs, projectors, and air conditioners has dropped from 28% to 18%, easing infrastructure expenses for production houses and theatres alike.
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The 56th meeting of the Goods and Services Tax (GST) Council has introduced sweeping reforms across multiple industries, but the Indian film industry finds itself only partially relieved. While the Council refrained from reducing the 18% GST rate on core film production services and premium cinema tickets priced above ₹100, a series of indirect measures promise cost efficiencies, enhanced competitiveness, and a push for global collaboration.
One of the most visible changes is the reduction of GST on cinema tickets priced at ₹100 or below—from 12% to 5%. This measure is expected to make moviegoing more affordable in smaller towns and tier-II cities, driving higher footfall in budget theatres and boosting revenues for regional cinema. However, tickets above ₹100 remain taxed at 18%, keeping premium and luxury cinema experiences unaffected.
The sector stands to gain significantly from tax cuts on inputs that form the backbone of film production. Promotional printing materials, including posters and banners, now attract 5% GST instead of 12%, directly reducing marketing budgets. Studio backdrops, textiles, and handicrafts used as props also see tax reduced to 5%, which not only lowers set design costs but also strengthens the integration of traditional artisans into the film supply chain.
The cost of consumer electronics like TVs, projectors, and air conditioners has dropped from 28% to 18%, easing infrastructure expenses for production houses and theatres alike. Grooming and beauty services, essential for shoots, have been slashed from 18% to 5%, although studios cannot claim input tax credit on them.
One of the most transformative changes comes from the reform in the “place of supply” rule for intermediary services. By shifting the criterion from the supplier’s location to the recipient’s location, Indian line producers, coordinators, and post-production firms working with foreign studios can now treat their services as exports. This makes them eligible for zero-rated GST and input tax credit refunds.
The reform aligns Indian tax policy with global norms, positioning the country as a more attractive destination for international collaborations. It opens new avenues for Indian creative professionals to work with foreign studios, bolstering India’s reputation as a global content production hub.
The Council also approved a risk-based provisional refund mechanism, which promises 90% refunds for zero-rated and inverted duty structure cases based on automated risk analysis. For film exporters and service providers, this ensures faster access to working capital. Simplified GST registration for small vendors and startups—auto-approved within three working days for those with turnover below ₹2.5 lakh per month—further reduces barriers for MSMEs supporting the film industry.
Additionally, operationalisation of the long-awaited GST Appellate Tribunal (GSTAT) by September, with hearings starting December, is expected to strengthen dispute resolution and reduce prolonged litigation costs.
Despite these gains, the Council did not extend relief to digital streaming platforms, leaving the OTT segment—one of the fastest-growing arms of the entertainment industry—outside the ambit of reforms. Group health insurance policies provided by employers to employees also remain taxable, denying companies a cost-saving avenue. Core film production services continue to be taxed at 18%, which many in the industry argue is burdensome for a sector already grappling with high production costs and post-pandemic recovery challenges.
Overall, the film industry emerges as a partial beneficiary of the reforms. While ticket reductions and input cost savings are expected to improve affordability and encourage regional cinema growth, the biggest breakthrough lies in the new export-friendly tax framework. By enabling Indian production service providers to work seamlessly with global studios under zero-rated GST, the Council has opened a new chapter for India’s emergence as a global film-making hub.
