Tamil film producers urge Finance Minister Nirmala Sitharaman to rollback TDS hike

The Tamil Nadu Film Active Producers Association (TFAPA) in a letter addressed to Union Finance Minister Nirmala Sitharaman on Monday, appealed to reduce the Tax Deduction at Source (TDS) for cinematograph films by reducing it to the previous rate of 2% instead of the new rate of 10%. In the letter to the Union finance minister, TG Thiagarajan, the chairman of CII-Media and Entertainment (South) and treasurer of TFAPA, cited that the industry has been reeling under the impact of the pandemic and the lockdowns.  

Elaborating on how producers have not been able to revive from the toll the pandemic has taken on the film industry, Thiagarajan cited that the industry had only begun to recover from the impact from the first lockdown from October 2020, but they once again had to stop all production related work due to the second lockdown which was imposed in April this year. “The sudden imposition of 10% Tax Deduction at Source (TDS) under Section 194-J (Fees for professional or technical service) on professional royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of cinematographic films has come a big shock to the entire industry,” he said. 

He estimated that nearly Rs 1000 crore of investment has been locked in over 120 films in the Tamil film industry and added that the producers are unable to pay back lenders and banks. “The producers are unable to pay the interest due on these investments to lenders and banks, and many are going through very difficult times and severe losses,” he said. 

In order to substantiate the TFAPA’s appeal, Thiagarajan highlighted the estimated success versus failure ratio and the nature of business to substantiate their appeal. “Unlike other industries which have some longevity in business operations, the film industry deals with one-time businessmen in the form of distributors, who will continue in the business only if they succeed from the film they distributed,” the statement read. He also added that new producers, who might quit the industry upon incurring losses, might not be able to enjoy the benefits of TDS reimbursement that is issued upon discontinuation of operations.  

Thiagarajan cited a joint report by global consultancy firm EY and FICCI released on March 27 this year, which states that the “film entertainment segment” has declined by 40% to Rs 7,200 crore in 2020 from Rs 11,900 crore for 2019, a steep fall for the industry. “In 2021, it may decline further by another 25% and touch a level of around Rs 5,000 crore turnover, which means, the industry would have declined by 60% in the last two years. Any drastic change like TDS at 10% shall lead to closure of the film industry, especially through theatrical business, which will impact lakhs of people associated with the film industry,” he said in the statement. 

Earlier when the Centre announced that 10% TDS is applicable to film distributors, Tamil Film Distributors’ Association members had put forward their resolutions with respect to TDS and the Local Body Entertainment Tax (LBET). Speaking to TNM in March, T Rajendhar, president of the Chennai-Chengalpattu-Kancheepuram-Thiruvallur distributors' association, had also expressed that they would stall releases if the government does not announce rollback of TDS.