New Tax Regime Spoils Show for UP Multiplexes
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states have offered tax holidays linked to investments, and while after the implementation of GST all such schemes were repealed, there are saving clauses grandfathering such exemption.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