Lights, camera, action, tax cut. Bollywood and the whole fraternity of performing artists are in for some taxing times as the finance ministry is seriously toying with the idea of classifying them as service providers.

As per the proposal, a film producer who engages an artist will have to pay tax at the rate of 12.24% on the service charge paid to the artist. All artists will have to register themselves as service providers with the service tax department, and anyone with an annual income (turnover) of above Rs 4 lakh will come under the new tax net.

Sure, Bollywood is in no mood to take this anti-climax lying down. Mukta Arts chairman Subhash Ghai told ET: The question is whether an employer-producer with the highest risk business model should pay 12.24% extra to all his professionals, or these pure earning professionals with no risk factors should pay to the government out of their own receipts?

Which one is fair? Judge for yourself. Mr Ghai pointed out that producers were already paying sales tax and other taxes in spite of the high-risk nature of movie business.

This proposal, if implemented, will only add to the producers cost, while professionals are at a 100% receiving end. So why choose producers or in fact why the burden on either? he asked.

Adlabs chairman Manmohan Shetty was worried about the scale of such a move. It would be very unfortunate if they do add this tax burden. It will inflate the movie budgets tremendously. Each movie involves so many artists and if you add the proposed 12.24% tax for each artist, from actors to singer and composer, it would mean a huge additional cost to the producer, he said.

UTV chairman Ronnie Screwvala said: This is purely speculative right now. But any cost added needs to be addressed. There is going to be a media representation with the FM, where we will address any such issue. Besides we already have an entertainment tax, so this would amount to double taxation.

There is already a fair segregation, which has outlined taxation of the brand ambassadors who make a lot of money. Definitely, the taxation should not be spread to include this context... but we will address this when we meet the FM.

The proposal being examined by the government will cover services of performing artists, authors, composers, sculptors and other artists. Besides, it also seeks to cover advertising, sponsorship and endorsement by artists, operation of performing arts facilities and other performing arts and live entertainment services.

Out of these, some of the services may be transferred to states as a part of the compensation package for phase out of the central sales tax.