Mumbai movie ticket prices may soon go up

The recent Brihanmumbai Municipal Corporation (BMC) proposal to raise the tax on films per show is likely to marginally increase ticket prices in the Maximum City, as the new entertainment levy impacts revenues shared between exhibitors and distributors.Mumbai, which has high penetration of multiplexes and single-screens and has significantly higher Average Ticket Price (ATP) relative to the national mean, contributes 20-25% to India’s gross box office collections.Recently, the BMC proposed to increase the entertainment tax on per film show—not per ticket—of exhibitors to Rs400 from existing Rs60, amounting to a jump of nearly seven times.This new entertainment tax on shows is likely to reduce box office revenue collection available and consequently, exhibitors estimate the average per ticket price may increase in the range of Rs 5-10, exhibitors and producers told ET.BMC New Proposed Entertainment ImpactParticularsCurrent taxProposed taxGross collection (Rs)100000100000Less: GST (18%) included in gross (Rs)15254.215254.23729Less: service charge (Rs)10001000Less: show tax (all shows) (Rs)*4202800Net collection available for sharing83325.780945.7Exhibitor share (50%)41662.840472.8Distributor share (50%)41662.840472.8Distributor difference vs current (Rs)01190Source: Karmic Films, number of shows considered is sevenConcerns loom over a possibility of a ripple effect of the tax to other territories in India amid what exhibitors claim to be a rather tepid business environment.“The new BMC tax proposal defeats the purpose of a one nation-one tax policy framework. It has come at a time when the business in India’s exhibition industry has not comprehensively surpassed pre-Covid levels,” said Devang Sampat, managing director, Cinepolis India.A key aspect in the proposed entertainment tax is that the levy is on shows and not on tickets, pointed out producers. But it will impact the box office revenues available for sharing between exhibitors and distributors after deducting the taxes, they said. “This is a fixed tax per show regardless of how many tickets are sold by exhibitors,” said Suniel Wadhwa, co-founder, Karmic Films. “But a higher tax on per show reduces the collection available for sharing between exhibitors and distributors.”Film trade analysts said that occupancy in theatres will be an important variable which will impact the tax costs for exhibitors. Lower the occupancy higher will be the tax costs incurred, thereby reducing box office revenue available for sharing. “The new proposed tax is tightly linked to occupancy. This is because the tax is on shows and not on tickets,” said Girish Wankhede, a movie trade analyst.On average, exhibitors estimate the average ticket price in Mumbai may go up in the range of Rs5-10 once the proposed tax is implemented. “Without getting into granular details, the hike of Rs340 entertainment tax per show will be passed on to consumers. This may lead to an increase of Rs 5-10 per ticket," said an exhibitor, requesting anonymity.