Multiplex won’t have to pay tax refund: HC

The average film-goer has nothing to gain from the tax-holiday granted to multiplexes in the state. Granting relief to Swanston Multiplex, owner of Fame Adlabs multiplex in Andheri, the Bombay High Court has struck down a government notification that sought a refund of the amount charged by the multiplex as excess entertainment tax during the tax holiday period.

A movie ticket worth Rs135 at Fame Adlabs included a charge of Rs41.95 as entertainment duty. But multiplex owners paid an entertainment duty of only Rs10.46 per ticket to the government. Calling it an “unjust enrichment”, the government served them a notice in December 2005, asking them to pay up the excess Rs1.16 crore collected from customers.

This notice was challenged by Swanston in the HC. Multiplexes enjoy a three-year exemption from paying entertainment duty to the government. This exemption was given to encourage multiplexes, which are capital-intensive projects. The government has fixed no upper limit for the cost of a ticket but has barred multiplexes from charging anything lower than that charged by single-screen cinemas.

During the fourth and fifth years, a multiplex is required to pay 25% of the entertainment duty normally levied by the state. From the sixth year, the multiplex pays the full entertainment duty at 45% of the net cost of a ticket.

Fame Adlabs was required to start paying 25% of the entertainment duty from June 7, 2005. On a net cost of Rs 93.05 for a ticket, the tax payable to the state worked out to be Rs10.46. The multiplex, however, charged the entire 45%, amounting to Rs 41.95, to the customers.

The court accepted Fame Adlabs’ lawyer Virag Tulzapurkar’s submission that the tax relief was provided to multiplex owners and not patrons. The HC said the government was not entitled to collect entertainment tax in excess of the specified 25% for the two years, irrespective of the tax amount printed on the ticket.