Navigating Taxation and Incentives in India’s Media & Entertainment Sector

India’s media and entertainment (M&E) industry, worth more than $25 billion, functions within a vibrant tax regime influenced by GST reforms, income tax laws, and focused incentives. In the post-GST era, the sector shifted from state-level fragmented taxes to a consolidated structure, while current budgets and policies seek to fuel growth through subsidies and ease of compliance. The blog unravels the tax regime for M&E firms with an emphasis on exemptions, GST effects, and incentives fueling sectoral growth.

1. History of Taxation of Media & Entertainment

Pre-GST Period: Fragmented State Levies

• Before 2017, entertainment tax was widely different in states, and hence, compliance issues existed:
• Here’s the information presented in a table format:

• This patchwork system resulted in double taxation (VAT + service tax) and inhibited pan-India distribution.
• GST:

1. Standardization and Input Tax Benefits
2. GST replaced 15+ taxes, with the addition of:
3. 28% GST on movie tickets (over ₹100) and in-theater services.
4. 18% GST on OTT platforms, broadcasting, and digital advertising.
5. Input Tax Credit (ITC) on production expenses (e.g., equipment, sets) and advertisement spends, lowering effective tax burdens.

• For example, studios are able to now recover ITC on ₹10 lakh of ad expenses, reducing ₹1.8 lakh of GST outgo.

2. GST Impact on Important Segments

– Film Production and Distribution

1. Theatrical Releases: States used to tax tickets between 20–110%; GST limits this to 18–28%, reducing consumer expenditure.
2. Satellite Rights: Previously taxed at 15% service tax + 12% VAT; now 18% GST with complete ITC.
3. Digital Content and OTT Platforms: OTT subscriptions and ad revenues are subject to 18% GST, simplifying tax burdens for the likes of Netflix and Disney+ Hotstar (now JioHotstar)

• Anti-Profiteering Measures

Businesses have to transfer tax savings to customers. For instance, a 10% decrease in cost of production on account of ITC should reduce ticket prices.

3. Income Tax Provisions and Budget 2025 Reforms

– Major Deductions

1. Section 80HHF: Permits 100% deduction on profits from film production/export for 10 years.
2. Startup Advantage: M&E startups are given tax holidays of 3 years in terms of Section 80-IAC.

-Union Budget 2025 Features

1. Simplified Tax Code: A fresh income tax bill looks to lower litigation and make deductions clear for creators of content.
2. Middle-Class Tax Relief: More disposable income likely to support OTT and cinema viewing.
3. Incentives for Local and International Productions

• Foreign Film Incentives

1. 40% Reimbursement: From 30%, foreign producers can claim reimbursement of 40% of Indian production expenditure (up to ₹30 crore).
2. 5% Bonus: For projects with Significant Indian Content (SIC), e.g., using local crews or locations.

• State-Support Schemes

1. Maharashtra: Exempts entertainment tax for Marathi films.
2. Goa: Provides location subsidies through the Film Facilitation Office (FFO)3.
3. Recent Policy Developments

• FFO Expansion: Now provides support to Indian filmmakers for permits, customs, and incentive applications.
• AVGC Promotion: Budget 2025 makes allocations for animation/VFX hubs, making qualifying projects eligible for 15% corporate tax rates.

6. Compliance Challenges

• ITC Documentation: Carefully maintaining GST invoices for equipment rentals, talent fee payments, etc.
• Anti-Profiteering Compliance: Periodic audits to ensure tax savings are passed on to end-users.

GST has made taxation in India’s M&E sector rational, while reforms in income taxes and production incentives make the nation a global content creation hub. Through ITC, subsidies, and compliant simplifications, studios are able to cut costs by 15–20% and re-invest in quality productions. With measures such as higher foreign filmmaker reimbursement and AVGC grants, the industry will grow at 12% CAGR to $50 billion by 2030.

Author:– Adita Sutaone, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or   IP & Legal Filing.