Taxing times ahead for Kollywood actors

While Bollywood has been more vociferous in opposing the central government’s decision to levy 12.36 per cent service tax on actors’ earnings, Kollywood too is simmering over the move, albeit in a less conspicuous way. Yes, we don’t have actors commenting or tweeting (“Really more tax. This government sucks. Corrupt and useless,” tweeted Sonam Kapoor) on the issue but industry insiders say that trade bodies are planning to appeal to the government to include actors in the Negative List.

Financial experts say that the new taxation, which came into effect on July 1, includes both film and television actors and is bound to increase production budgets in both the industries. A city-based chartered accountant who deals with the entertainment sector, on condition of anonymity, says, “Going by the new service tax, an actor who is earning 10 crore per annum will now have to shell out roughly 1.23 crore as service tax in addition to the normal income tax that he has to pay. However, actors whose annual income is less than 10 lakh will not be required to pay this tax. In short, it will be the bigger stars who will be affected to a great extent by the move.”

The general perception in the industry currently is that it will ultimately be the producers who will be forced to bear this additional burden because it is actors who call the shot in the industry. “Of course, that is what always happens. Now, all bankable actors will force their producers to raise their salaries giving this tax as a reason,” says a well-known producer.

While actors whom we approached refused to comment on the matter, we hear that members of the Tamil Film Producers’ Council seem to have already begun discussing the implications of the issue. However, the course of action has not yet been decided. “We are trying to appeal to the government through the South Indian Film Chamber of Commerce,” is all a high-ranking member of the TFPC was willing to reveal at the moment.

What’s Service Tax?

Service tax law from July 1, 1994 till June 30, 2012 was based on selective taxation and approximately 120 services were defined on which tax was payable. With effect from July 1, 2012, all services have become taxable other than specified and exempted ones. This scheme is popularly known as Negative List.

‘Service’ has been defined as an activity for consideration carried out by a person for another. Hence, the activity of acting by actors for producers will be taxable. Therefore, on the money received by actors, service tax would need to be paid at the current rate of 12.36 per cent. Service tax and income tax are two different levies. Therefore, actors will be required to pay service tax to the service tax authorities and income tax to the income tax authorities. However, as service tax is an indirect tax, it is passed on to the customers. So, the actors will be able to recover service tax from the producers.