New Tax Regime Spoils Show for UP Mul­ti­plexes

The Economic Times - - Economy: Macro, Micro & More -

Gau­rav Laghate & Sachin Dave

Mum­bai: Mul­ti­plex chains with new prop­er­ties in Ut­tar Pradesh are in a pickle as the tax sops promised by the state gov­ern­ment have gone away un­der the Goods & Ser­vices Tax (GST) regime.

In a bid to get in­vest­ments in the state, the Akhilesh Ya­dav-led pre­vi­ous state gov­ern­ment had doled out sops in­clud­ing a five-year tax ex­emp­tion to mul­ti­plexes. As part of the scheme of ex­emp­tion, mul­ti­plex com­pa­nies were al­lowed to charge and re­tain en­ter­tain­ment tax un­der dif­fer­ent slabs. The mul­ti­plex com­pa­nies could 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 ope- ra­tions, re­spec­tively. How­ever, with the im­ple­men­ta­tion of GST since July 1, en­ter­tain­ment tax has been sub­sumed and the at­tempts made by some mul­ti­plexes to get re­fund from the state gov­ern­ment have been in vain. Seek­ing re­lief, GNG En­ter­prises has filed a writ pe­ti­tion in the Al­la­habad High Court, while other mul­ti­plexes are ac­tively ap­proach­ing the state gov­ern­ment for clar­ity.

“Many mul­ti­plexes had in­vested in UP based on the gov­ern­ment’s as­sur­ance of tax breaks, but since July en­ter­tain­ment taxes are sub­sumed in GST,” said Ab­hishek A Ras­togi, part­ner at Khai­tan & Co. “The way the gov­ern­ment has given some lee­way to spe­cial man­u­fac­tur­ing zones, these mul­ti­plexes must also be given promised re­lief as they are bear­ing the ex­tra bur­den just for re­ly­ing on a gov­ern­ment’s pol­icy.”

It is not just UP, but many states have of­fered tax hol­i­days linked to in­vest­ments, and while af­ter the im­ple­men­ta­tion of GST all such schemes were re­pealed, there are sav­ing clauses grand­fa­ther­ing such ex­emp­tion.

Deepak Asher, pres­i­dent of Mul­ti­plex As­so­ci­a­tion of In­dia, said the prob­lem is not just with UP, but with all the states wher­ever ex­emp­tions were given by the re­spec­tive state gov­ern­ments. “Un­der the pol­icy, there is a clause for grand­fa­ther­ing ge­o­graph­i­cal ex­emp­tions. Ideally, the states should re­fund the amount promi- sed un­der the ex­emp­tion, but none of the states have is­sued any clar­i­fi­ca­tion or re­fund mech­a­nism,” he said.

Many feel that the sops ex­tended to mul­ti­plexes should be grand­fa­thered un­der GST, that is sim­i­lar ben­e­fits must be ex­tended un­der the com­mon indi­rect tax frame­work. Nitin Sood, CFO at PVR, added that his com­pany, along with MAI have made rep­re­sen­ta­tions to var­i­ous state gov­ern­ments, and they are ex­pect­ing the states to come out with re­fund rules.

“A lot of in­vest­ments have been made into var­i­ous states, where such in­vest­ments were in­cen­tivised with ex­emp­tions. We are wait­ing for clar­ity from state gov­ern­ments on the is­sue and hop­ing that within few months, they will come out with re­fund pol­icy,” Sood said.

Tax ben­e­fits doled out by pre­vi­ous govt have gone away with the roll out of uni­form levy

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