GST 2015: Will The Cost Of Filmmaking Increase?

Daily Seni
January 6, 2015 15:05 MYT
It remains to be seen if GST will have an impact on the filmmaking industry.
Goods and Services Tax (GST) is confirmed to be implemented with effective from April 1, 2015 and rate is fixed at 6 (%) percent. GST replaces the present consumption tax comprising the sales tax and the service tax (SST).
While there is a chance that movie-goers will have to pay more per movie ticket with an added 6% GST to the already existing 25% entertainment duty, what about the cost of making a film? Will there be an upsurge in the production cost of filmmaking with GST?
According to NBC Group, the difference between GST and SST is in terms of its scope of charge which is inclusive of the manufacturing and distribution stages. When compared with SST, the sales tax is imposed only at the manufacturing stage. Meanwhile, service tax is imposed on specific services at the time when the services are provided to the consumer. This means that the new GST is imposed on goods and services at every production and distribution stage in the supply chain.
Since filmmaking is compartmentalised into three stages of pre-production, production, and post-production, the question arises of whether the cost of filmmaking will increase with the implementation of GST. With the 6% GST imposed at every production and distribution stage in the supply chain, the rise in production cost is inevitable.
For example, the equipments and spaces rented to a production house will have the 6% GST charged. Not to mention outsourcing for editors during post-production stage. Besides that, the talents (actors) and freelancers whom are taxpayers as well may increase their prices. The endpoint is that for every goods and services to a production house, the cost will definitely increase. Will production houses be able to cover the rising costs? Are the major TV stations prepared to raise the production budget along with the market price?
Minister of Communication and Multimedia, Datuk Ahmad Shabery Cheek has questioned whether part of the Entertainment Duty of 25% collected by the State Government should be turned into a development fund to produce more quality local content.
He stated that instead of using the tax money to repair and maintain civil infrastructures, the entertainment tax should be reinvested and flow back into the creative industry, adding that the Entertainment Tax returns policy has been adopted in other countries such as Korea.
If similar policy is implemented in Malaysia, it would create an ecosystem whereby the 25% entertainment duty will flow into filmmaking development funds while the 6% GST used for civil development. Then the rise in production costs could be covered by the film funds amassed by the entertainment tax flow into the funding.
Nevertheless, it remains to be seen if GST will have an impact on the filmmaking industry. We may face an inflation of prices when GST is implemented and will need production costing to be done appropriately.
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