The Telegraph
Since 1st March, 1999
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Tax contract out on stars

Mumbai, June 29: Next time Amitabh Bachchan signs on the dotted line, he may have to cough up Rs 250 for every Rs 1 lakh he earns from the movie.

Bachchan won’t be alone. From Sachin Tendulkar to Smriti Irani, every celebrity who makes money through mass media can be covered by a new “star tax” that has stunned Bollywood and the rest of the entertainment establishment in Maharashtra.

The levy will be imposed in the form of a 0.25 per cent stamp duty on monetary contracts valued above Rs 1 lakh that performing artistes sign. The tax translates into Rs 250 for every Rs 1 lakh of their fee.

The duty ' announced through a May 7 notification that was lying unnoticed till now ' has a far wider reach as an accompanying clause says endorsements, too, will fall under its purview. This means even sports stars who appear in advertisements will have to pay the tax.

Bollywood, expected to be hit the hardest if the tax stays in place, reacted with dismay, saying the levy will derail efforts to clean up the film industry.

Dealing in hundreds of crores of rupees, the film industry is one of the least transparent in the country and few players have been able to escape charges of tax evasion. Disclosure norms are virtually alien and widely varying figures are trotted out on every count, ranging from actors’ fee to production costs.

Several stakeholders in the industry felt that the new law is tantamount to another incentive for accepting money in black ' a rampant practice that showed feeble signs of ebbing when mainstream financial institutions evinced interest in bankrolling films.

Industry associations as well as actors have sought an appointment with chief minister Vilasrao Deshmukh after he returns from the US on July 3. If the mission fails, a legal challenge is not ruled out on the grounds that the industry is paying several taxes now and stamp duty is usually levied on property, not people.

A top official in charge of enforcing the new tax said virtually every segment of the entertainment industry would be covered. “Even endorsements signed by film or sports stars with companies for promoting products through the mass media would come under its purview,” said deputy inspector-general (stamps and registration) V.M. Mhaske.

Alarmed by the sweeping reach of the amendment, the Indian Motion Pictures Producers’ Association (IMPPA), the apex body of the film industry, has invited Mhaske for a meeting next week to explain the implications.

“The duty is very low. The levy is Rs 25 on an amount of Rs 1,000 or Rs 250 on Rs 1 lakh or Rs 25,000 on a contract worth Rs 1 crore. This money is going to the state treasury for the development of the state,” a revenue official said, taken aback by the backlash.

But industry leaders pointed out that they are not opposing the tax rate but the very principle behind the levy.

“This is absurd. They think the film industry is a fat cow that needs to be milked. The issue is not about 0.25 per cent duty, but about a blinkered, petty mindset of the government'.

“Neighbouring countries are inviting us without restrictions, and the birthplace of Indian cinema is giving us a raw deal due to its myopic vision,” director Mahesh Bhatt said.

Another grouse is that the industry is already paying several taxes. Sushma Shiromani, actor-producer and the president of the IMPPA, said: “The government has been subjecting the film industry to a barrage of taxes. They should have consulted the industry captains before issuing a notification. They are taking us for granted.”

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