The Multiplex Association of India had requested that the tax on culinary services in movie theaters be reduced. According to the report, their representation to the GST Council occurred after confusion arose due to reports of theatres receiving ‘notices’ regarding the GST that they were imposing.

What does ‘5% tax’ mean?

Currently, movie tickets priced over 100 are taxed at 12%, and those priced over 200 are taxed at 18%. Therefore, when theaters offer customers an online combo option for food and a movie, the GST will be applied to the total price and will be taxed at 18%.

The 5% GST, on the other hand, is applicable when food is purchased at the theater separately from the movie ticket. To avoid the increased GST, industry professionals advise consumers not to pre-order snacks.

Food and beverages account for nearly half of the price of admission.

According to Nitin Sood, CFO of PVR Inox, food and beverages (F&B) alone account for up to 52 percent of the price of a movie ticket.

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Consumers spend approximately 50-52% of their average ticket price on food and beverages. And there is no reason for this number not to be greater. This ratio has been as high as 70-75 percent in Western countries. And it is our intention, over the next few years, to increase the overall food and beverage consumption in movie theaters.

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In March of 2012, the boards of PVR Ltd and Inox Leisure Ltd approved an all-stock merger to create India’s largest film exhibition entity with over 1,500 screens.

Existing multiplex screens will retain their respective brands, whereas new cinemas opened after the merger will be branded as PVR Inox. The name of the merged entity is PVR Inox Ltd. Due to the pandemic’s devastation of the film exhibition industry, the post-merger revenue of the two companies falls below Rs. 1 billion, allowing them to avoid CCI approval.

“There was already a certain duopoly in the (film exhibition) market, and while we can debate the pros and cons of the merger, the reality is that there is now a need for stronger competition because this new entity will be three to four times larger than the next largest competitor,” said Rahul Puri, managing director of Mukta Arts and Mukta A2 Cinemas. Puri stated that chains like Mukta will not compete for premium properties in A-list cities, but will continue to expand in the Hindi-speaking heartland, particularly in the Mumbai and Gujarat region, in addition to Andhra Pradesh and Telangana, where they already have a substantial presence.

The chief executive officer of MovieMax Cinemas, Ashish Kanakia, concurred that the merger will create intense competition for new and emerging cinema chains. “Each cinema chain has its own strategy and is supported by quality teams. Kanakia stated that the company has signed a contract to add more than 100 screens in India over the next few months. “We are looking to enter areas where either there is no multiplex or it needs revitalization,”

PVR and INOX did not respond to  questions regarding the merger’s potential repercussions. Even the third largest player, Cinepolis, did not respond.

A senior multiplex chain executive stated, on the condition of anonymity, that there are opportunities for players like Cinepolis, Miraj Cinemas and other emerging chains to expand their presence, given that Carnival Cinemas’ screen count has decreased from 400 to less than 100 over the past few months. The company that has been struggling with debt is unlikely to return to competition, and the screens it has lost over the past few months are now available for purchase. “However, PVR and INOX could jointly renegotiate a number of terms, forcing other players to bear the brunt until they do not gain significant market share themselves. “For instance, if a significant portion of cinema advertising budgets go to the merged entity, there won’t be much left for players with a market share of 1% to 2%,” the individual said.

Even though non-national multiplex chains and independent cinemas have always been bullied, the going could get tougher for them, according to an unnamed single-screen theatre owner. “They could dictate the terms, and others would be required to comply. If we do not agree to their proposed revenue split, we will have to abandon the project. In addition, producers of a large number of smaller films may restrict their distribution to the two largest chains in order to control costs. If this occurs, we will be deprived of content, the individual said.

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