Yet another dialogue among the state finance ministers in the balmy climes of Goa failed to create a consensus on the goods and services tax (GST) design, including the constitutional amendment for its introduction.

The worrisome aspect is that the various political bargains being made would undermine the basic objectives of GST. One such bargain is the continuation of the entertainment tax (currently levied on movie admissions and cable and DTH subscriptions) in addition to the GST. This is a matter of deep concern as it would give rise to significant distortions and be highly discriminatory to the film and television sector.

Supplementary taxes under GST are normally levied on sin products like alcohol and tobacco or polluting products. Such a tax on films is not justified. Indian films are one of the finest expressions of our art and culture and have been instrumental in showcasing India across geographical boundaries.

They need to be nurtured and encouraged. Internationally, entertainment is included in the VAT or GST base and is taxable like any other good or service. There are no examples of a supplementary tax being imposed in any of the countries reviewed.

In fact, the film industry is recognised as a priority industry and is subjected to reduced GST/VAT rates, and granted significant fiscal incentives. France, Germany, Spain and Sweden, for instance, charge super reduced VAT/ GST rates, which provide a reduction of more than 50% of the standard rates.

In India, the current entertainment tax structure is seriously flawed. It is a patchwork of many taxes being levied at punitive rates.

For example, movie admissions in Uttar Pradesh attract tax at a rate as high as 67%. Cable and DTH subscriptions attract the central service tax of 10.3%, as well as state or local taxes which could be as high as Rs 45 per month (in Mumbai).

Further, entertainment activities are inter senot treated at par and each activity attracts a different tax rate. Entertainment includes a variety of activities including art exhibitions, performance, game, sport or race, cinematographic exhibitions , amusement parks, video game parlours, bowling alleys and billiards/ pool joints, to name a few. Some of these are taxable, but others exempt. Where the tax applies, there is no uniformity in the tax design or the rate.

There is variation in the tax rates on the same entertainment source, but acquired at different places. For example, the tax on movie tickets can depend on the category of the city/town or its population. Many states grant exemption or apply subsidised tax rate on movies produced in regional or state languages. Some states exempt newly set up theatres/ multiplexes , creating discrimination against old theatres.

Separate tax on entertainment poses significant practical difficulties in the present times of fast-paced technological advancements and resultant mobility of entertainment avenues.

With the advent of modern technology , entertainment has taken more diverse forms and has become highly mobile . For instance, movies and films can be watched not just through cinema halls, cable or DTH connections but also on computers, mobile phones and media players.

Given this diversity, it is difficult to apply a separate tax on entertainment in a fair and equitable manner. Currently , cinema tickets and DTH and cable connections are subject to entertainment tax, which can be avoided if you watch a programme or movie at home on a DVD.