``While entertainment tax on films has gradually been reduced from 70% to an average of about 50%, we have recommended a further reduction to 25-30%,'' I&B minister Priya Ranjan Dasmunsi said. ``This will give a boost to the exhibition sector and reduction of ticket rates would encourage more viewership,'' he added. The ministry has set up a committee that will examine differential taxation in the country and suggest a uniform rate. A consensus on the issue is likely to emerge by December.

A cut in entertainment tax can affect the fortunes of a film substantially. Says distributor Sanjay Mehta, whose film Omkara was made tax-free in Uttar Pradesh, ``The film's collections went up by 15-20% after the tax exemption.'' The story is similar with small films made for niche audiences like Iqbal and Hanuman. However, Mehta adds that a tax exemption would not help a bad film but give the `right' boost for a good one. Mehta said that a drop in ticket prices would ``marginally affect'' cinema audiences though it would bring in substantially more students.

According to a research conducted by FICCI for the Multiplex Association of India, it was found that while India is the highest film producer in the world with the highest number of film admissions, it also has the dubious distinction of being the highest ``entertainment taxed'' country. Besides a hefty entertainment tax which nearly doubles the cost of the ticket (entertainment tax ranges between 40%-100% on ticket revenues, the film industry also coughs up 12.5 sales tax or VAT on the eatables and drinks, 12.36% service tax on the advertising revenues, 12.5% VAT on the distributor payouts, 12.36% service tax on property rentals besides taxation on property, advertising and show tax.

Greeting the news cautiously, Pramod Arora, CEO of PVR Cinemas, said, ``A slash in entertainment tax would prove to be a big boost to the industry and to PVR Cinemas.'' He added that the industry had demanded a cap of 16% across the country as a uniform taxation policy.

Besides cinema tickets, concerts are also affected by high rates of taxation. With taxes ranging up to 50% in some states, international and domestic artistes shy away from performing in the country. Delhi has only recently reduced entertainment tax after several instances of artistes giving the Capital city a miss.