Tax On Multiplex Popcorn, Cold Drinks, Reduced From 18% To 5%

The Goods and Services Tax (GST) Council has decided to lower the service tax on food and beverages consumed in cinema halls from 18% to 5%.

This decision has been welcomed by multiplex operators, who believe it will help revive the theater business after the Covid-19 pandemic and prevent legal disputes.

Food and beverages are a significant source of revenue for the cinema exhibition industry, particularly for multiplexes, which earn up to 35% of their revenues from this segment.

The GST Council clarified that food and beverages in cinema halls will be taxed as a restaurant service, as long as they are supplied as part of a service and independently of the cinema exhibition service.

However, if food and tickets are bundled together in an online booking, the 5% tax rate does not apply. The cinema industry has expressed its support for this clarification and the 5% GST rate without input tax credit.

The film exhibition industry in India has faced significant challenges due to the pandemic, with cinemas being closed for a prolonged period. However, starting from March 2022, cinemas were allowed to operate at full capacity.

One of the major issues faced by the industry was related to the Goods and Services Tax (GST), with various states seeking higher GST rates for food products sold in cinemas.

The decision led to disputes and litigation between cinema operators and state governments. However, a recent clarification has brought clarity to the sector, stating that all food items sold in cinemas will be charged at a 5% GST rate.

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This clarification is expected to resolve the industry-wide issue and provide tax certainty, ultimately aiding in the revival of the theater business post-pandemic. Despite the challenges faced, the cinema business is diversifying its food and beverage offerings to attract customers.