Single-screen cinema theatres across the country and all cinema-related activities in some states will come to a standstill on February 23 following a shutdown call given by the Film Federation of India against the government's decision to levy 10.3 per cent service tax on the film industry.
However, large multiplex chains have withdrawn from the strike after a meeting early this week with Union Finance Minister Pranab Mukherjee, who refused to roll back the levy.
"This is double taxation as states already levy entertainment tax on us. The effective indirect tax cost on cinemas will go up to 60 per cent," Vinod Lamba, president of the Film Federation of India said after his meeting with the finance minister.
The government's decision to impose a 10.3 per cent service tax on the cinema industry has led to total confusion in the trade about who will pay the tax from their net share --the exhibitor or the distributor.
The film industry contends that entertainment tax ranges from 0 to 67 per cent depending on the state and that the empowered committee of state finance ministers had suggested that the government should not impose taxes on any items mentioned in the State List of the Constitution, including entertainment.
The Film Federation of India, which is an umbrella body comprising various industry associations including exhibitors, distributors and producers, has said the strike will result in a shutdown of more than 9,000 single-screen theatres.
The strike enjoys the support of the Film and TV Producers' Guild and the Indian Motion Picture Producers' Association, besides studios, production houses as well as film artistes and technicians.
Multiplexes constitute less than 10 per cent of India's 10,561 screens and members of the Multiplex Association of India have pulled out of the strike.
Another truth is, India produces more than 1,200 films in a year in various languages but only a few films become blockbusters or huge money-spinners.
Questions K V Chandrashekar, president of the Karnataka Film Chamber of Commerce, "The entertainment industry is not a service industry per se and it is not known who has to bear the burden of service tax. Will it be the producer, distributor or exhibitor?"
Jayamala, Kannada actress and past president of the Karnataka Film Chamber of Commerce, said that the additional tax burden will have to be borne by the producer who is already burdened with high production costs and high theatre rentals.