Multiplex companies to have Improved margins under GST

The multiplex companies are likely to get benefited post implementation of GST. The gains will not come from the ticket sales, but through tax credit that these companies gain on fixed costs.

Customers will now have to pay a tax of 28% on tickets costing above Rs 100 and 18% on tickets costing less than Rs 100, as against a 27% tax on ticket collected under the current system. Due to this, companies sch as INOX and PVR will be on a higher tax slab as majority of their tickets cost more than Rs 100

The foods and beverage (F&B) segment would affect the pockets of the customers as F&B would be taxed between 12-14% where the rates would depend upon composition of the F&B items, which was earlier taxed around 11%.

The PAT margin for PVR in FY17 was 4.64% with net profit of Rs. 92.92 crore, whereas INOX reported PAT margin of 2.49% with net profit of Rs 30.48 crore.

GST is likely to bring in more for companies through input credit tax, but with an increased tax in F&B segment, it would be interesting if these companies pass on increased tax to their customers.