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You are being overtaxed at the multiplex

Court asks Fame Adlabs to deposit Rs1.98 crore till a case regarding collection of excess entertainment duty from customers was decided.

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The last time you bought movie ticket worth Rs135 at Fame Adlabs in Andheri, it included a charge of Rs41.95 as entertainment duty. However, the multiplex owners paid an entertainment duty of only Rs10.46 per ticket to the state government.
 
In an interim order on Tuesday, the Bombay High Court asked Swanston Multiplex Cinema, which owns Fame Adlabs, to deposit Rs1.98 crore till a case regarding collection of excess entertainment duty from customers was decided. The amount, which has been disputed by Swanston, would be refunded or adjusted depending on the verdict, the court said.
 
Multiplexes enjoy a three-year exemption from paying entertainment duty to the government. This exemption was provided with a view to encourage multiplexes, which are capital intensive projects. The government has fixed no upper limit for the cost of a ticket, but has barred multiplexes from charging an amount lower than single-screen cinemas.
 
During the fourth and fifth years, a multiplex is required to pay 25 per cent of the entertainment duty normally levied by the state. From the sixth year, it has to pay the full entertainment duty at 45 per cent of the net cost of a ticket.
 
In the present case, Fame Adlabs was required to start paying 25 per cent of the total entertainment duty from June 7, 2005. On a net cost of Rs93.05 for a ticket, the tax payable to the state worked out to be Rs 10.46. The multiplex, however, charged the entire 45 per cent, amounting to Rs41.95, from the customers.
 
Calling it “unjust enrichment” the state government served Fame Adlabs a notice in December 2005, asking the authorities to pay up the excess Rs1.16 crore collected from customers. This notice was challenged by Swanston in the HC.
 
Government pleader Amjad Syed pointed out that the multiplex collected entertainment duty in excess of what they needed to pay the government. “Only the government can levy and collect tax,” he argued.
 
Virag Tulzapurkar and Vineet Naik, who appeared for Swanston, argued that the tickets were printed in accordance with a government directives. Following a circular issued in January 2006, a ticket costing Rs135 is now broken up into a net rate of Rs121.30 and entertainment duty of Rs13.70, they said.
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