Why Did the TN Government Exempt ‘Kabali’ from Paying Its Entertainment Tax?

Perhaps the time has come for the tax sops to be removed altogether. Far from helping the Tamil film industry, the government stipulations have stifled filmmakers.

A banner for the film 'Kabali' outside the Sathyam Cinemas multiplex, Chennai. Credit: @RajiniFC/Twitter

A banner for the film ‘Kabali’ outside the Sathyam Cinemas multiplex, Chennai. Credit: @RajiniFC/Twitter

The big Kabali weekend is past. For many Tamil speakers, the last couple of days should come as a reprieve getting back to business from the unprecedented mania that Rajnikanth’s latest whipped up. The Facebook and Twitter feeds at least are recovering from discussions about the movie.

But important questions about Kabali’s business at the box office need to be raised. First: how come so many Kabali tickets were sold in the black during the film’s opening weekend? Second: why did the Tamil Nadu government waive the entertainment tax for Kabali when it exhibited as much violence as it did?

Kabali’s producers have already started gloating about the huge returns from the film for distributors and exhibitors in the first days since its release on July 22. The numbers range from Rs 70 crore to Rs 100 crore in Tamil Nadu alone, and various analysts are poring over whether or not the Rs-250-crore being projected by the film’s producer, S. Thanu, is even possible.

Be that as it may, tickets were sold for Rs 200-300 on online portals like, well above the government-stipulated caps on ticket prices in the state.

Tamil Nadu is one of the cheapest places in the country to watch a movie, where the government has fixed the maximum rates for admission: Rs 120 for multiplexes with three or more screens; Rs 95 for multiplexes with two or more screens; and so on (this is the complete list). These numbers were established according to a government order in May 2009, and have not been revised since.

However, the rules binding them are often violated during the ‘special shows’ organised by an actor’s fan clubs, usually for what is the ‘first day first show’. These are typically the morning shows arranged by exhibitors and fans, ostensibly after getting police permissions, while the tickets are blocked en masse by the fan clubs and subsequently resold at higher rates. And what has happened with Kabali is tough to ignore: almost the entire first weekend sale of tickets were sold at hugely inflated prices in Chennai.

The tax concession

The other issue is of the entertainment tax, which was introduced by former chief minister M. Karunanidhi in 2009. At the time, the Dravida Munnetra Kazhagam (DMK) patriarch said the move was to encourage film makers to give Tamil titles to films and to encourage the use of Tamil, and his government went ahead with the move even though it cost the public exchequer Rs 50 crore a year.

When the Anna Dravida Munnetra Kazhagam (AIADMK) was elected to power in 2011, the rules were changed to introduce a vetting process. A government-constituted panel, comprising individuals from the Tamil film industry and various walks of life, would watch the films and decide – unto the Commercial Taxes department – if they were eligible for having their entertainment tax waived. The grounds for selection would be based on whether or not the films are in tune with ‘Tamil culture’, criteria that include checking whether the film glorifies violence/obscenity or not as well.

The vagueness of the grounds for exemption from entertainment tax has been a constant source of disagreements, with several film-makers and activists protesting the panel’s recommendations to the Commercial Taxes department. Nevertheless, Kabali‘s featuring some gory sequences in its second half (of the kind seldom seen in Rajinikanth’s films) raises questions about the tax waiver. Moreover, given its performance at the box office, the Rs-50-crore-loss may not be far off.

At the time of its institution, entertainment-tax waivers were reserved for small-budget films that were based on subjects of public relevance as well as those films produced by small-time filmmakers who were taking on socially conscious stories despite the box-office’s odds.

Politics at play

Another change from 2009 has concerned the distributors. The umbilical connection between Tamil politics and cinema is only too well known. But in the last decade, the political clout of those involved in the distribution business in the state cannot be overlooked. In October 2015, the Madras High Court passed a ruling that the entertainment tax benefit that the Tamil Nadu government gives for films must be passed on to the viewers. In effect, tickets for films that have been exempted from the 30% tax component in city multiplexes must cost Rs 84, not Rs 120.

When it comes to enforcement of government strictures, the AIADMK has repeatedly proved that it can be strict. So why are rules being overlooked when it comes to Tamil cinema?

Perhaps the time has come for the tax sops to be removed altogether. Far from helping the Tamil film industry, the government stipulations have stifled filmmakers, marking a cap on the returns a movie makes. While the ticket fares in neighbouring states have been in the range of Rs 250-500, the leash over ticket fares in Tamil Nadu have hurt the industry and have contributed to the rise of a thriving black market.

In an interview with The Hindu in June 2014, actor and filmmaker Kamal Haasan called for the deregulation of ticket fares in the state as possibly being a step toward improving the health of cinema in it, as well as qualifying his opinion by saying it was the industry’s as well. One of the actor’s recent films, Papanasam, released in June 2015, did not get a tax exemption. The reasons cited included showing police forces in unflattering light as well as a criminal seeking atonement through a holy dip instead of turning himself in.

Karthik Subramanian is a freelancer writer in Chennai.