GST Cut May Not Necessarily Lead To More Moviegoers, Says Deepak Asher

Freshly popped popcorn is displayed for sale inside the snack bar at the Georgetown Drive-In movie theater in Georgetown. (Photographer: Luke Sharrett/Bloomberg)

Lower tax on movie tickets may not necessarily translate into higher footfall in cinemas, said Deepak Asher, president of India's Multiplex Association.

While lower prices leading to more demand is the general economic theory, "unfortunately in this business we are not selling a standard homogeneous product which is the same week-to-week," he told BloombergQuint in an interview. "Demand also depends on the quality of content rather than the price."

The Goods and Services Tax Council reduced the tax rate for 22 goods and services—including movie tickets—on Saturday. For tickets costing more than Rs 100, moviegoers need to pay 18 percent GST from Jan. 1 instead of 28 percent, whereas for tickets priced less than Rs 100, only 12 percent GST will be charged.

Multiplex owners intend to pass on this benefit entirely to consumers, Asher said. The exact effect on demand, however, is not easily quantifiable.

There's no direct cause and effect one can establish through statistical analysis. It's just gut feeling and economic theory that leads you to believe that lower prices would mean higher footfall.

Deepak Asher, President, Multiplex Association

Multiplex stocks rose today, reacting to the development. PVR Ltd. rose as much as 2.9 percent in opening deals to Rs 1,610 but later erased its gains and fell 1 percent to Rs 1,548.

Inox Leisure Ltd. rose as much as 4.12 percent to Rs 249.