Not so long ago we had seen that PVR cinemas moved to court over tax exemption issue in Uttar Pradesh. They moved the Allahbad court over the issue of subsuming the entertainment tax into the Goods and Service Tax. The main argument PVR had here was that the Uttar Pradesh government had promised to allow multiplexes and cine malls to retain a portion of the entertainment tax for five years, on the basis of the investment they make, but that was broken after the tax was subsumed into GST.

Similarly, other multiplex owners have also started to move courts over the similar issue. Very recent example being in Rajasthan. Khaitan & Co., who is an arguing counsel to the multiplex company which had invested in Rajasthan faced a similar issue and have moved to Rajasthan High Court. They are asking for a tax exemption from the Rajasthan Government, promised under the Rajasthan Investment Promotion Scheme, 2014.

The scheme which was to promote investments and generate employment opportunities in Rajasthan, exempted multiplex players from payment of 50% entertainment tax for seven years upon investment in the state. But not only the tax exemptions promised by the state government have gone away since the implementation of GST, but the taxes have rather increased to 28% (18% for tickets under 100) from 15% earlier. As part of the scheme of exemption, multiplex companies were allowed to retain 100% of entertainment tax charged in the first year, 75% in second and third year, and 50% charged in fourth and fifth year of operations, respectively.

The argument is that Multiplexes have invested based on the promise of getting the tax benefits. As a corollary, arbitrariness under Article 14 of the Indian Constitution comes into play. The entire argument will be based on relevant provisions of Section 174 of the Rajasthan GST Act and the recommendations which should have been given by the GST Council as per article 279A of the Indian constitution.

We as an industry are in a desperate need of screens in the country so that piracy can be combated but things which are promised to new business owners risking a lot to come into the exhibition market need to be kept so there is enough infrastructure for the country to enjoy. Trade Magazine