Internet handling fee –  BookMyShow under RBI Microscope

Internet handling fee – BookMyShow under RBI Microscope

Internet handling fee – charged by movie ticket booking sites and payment platform are under RBI microscope/scrutiny for charging ‘convenience’ and ‘internet handling’.

It is very easy and convenient to book a movie ticket online through app on ones mobile phone or a website using computer.  But one has to think what is the ‘internet handling fee’ that we pay against each ticket means.

Internet handling fees in India :

India is a country which produces over 1000 films every year, which is a record in itself. This tells us how crazy the country is.

Previously, there used to be movie theatres, single-screen movie theatres, where one movie would run once. Tickets were sold at counters and nothing was done online.

However, multiplexes came, multiple movies screened at a single time, seats became important, recliners were preferred and everything changed.

The movie-going experience suddenly went on a different level altogether. With that experience, the ticket prices and the mode of booking also became different.

The internet handling fees as of 2018 is 17% i.e. for a ticket of around 300 INR you pay Rs.50/-as fees. But that’s not it, since they are giving you a service you will have to pay the GST on top of this 17%.

Internet handling fees on BookMyShow :

BookMyShow gives all theatres featured on their portal an option to levy the payment gateway fee on the customer in the form of internet handling fees, when in fact, the theatres are supposed to pay that amount to the bank for each debit/credit card transaction.

BookMyShow is an aggregator service for the entertainment industry where they assist one with information and ticketing for movies and different events across many cities all over the Country.  They let one book movie tickets in cinema in the simplest, easiest and the smartest way without unnecessary glitz.

How it works :

The BookMyShow aggregator charges Rs.19.82 as internet handling fees that includes a booking fee of Rs.16.80 and Rs.3.02 Integrated GST (IGST) at 18%.  Most of the people don’t  mind paying a little extra cost to avoid standing in the queue.  The amount Rs.16.80 is to be paid by BookMyShow to the bank and not by the customer.

BookMyShow gives all theatres mentioned in their portal an option to levy the payment gateway fee on the customer in the form of internet handling fees, where in reality it the theatres are supposed to pay that amount to the bank for each debit or credit card transaction.

RTI Query – Internet handling fee :

A RTI query was lodged to the Reserve Bank of India by Sanjay Gopal, who happens to be the President of ‘Forum against Corruption’. RBI, therefore said that online ticket aggregators do not hold the right to charge any kind of fee as they are not authorized to do so.

It also said that, if any such charge is levied then a complaint can be lodged to RBI. It further stated that these companies are violating the law of Merchant Discount Rate (MDR).

According to the IT Act 6A (3) section, digital service providers are not allowed to charge such fee without permission from RBI.

For a service provider of this nature, to collect, retain and appropriate service charges, they need to take permission from the RBI.

Views of law on internet handling fee :

The RBI in an RTI query recently stated that online platforms through which movie tickets are booked do not hold the authority to levy handling fees from customers. The reply further explains that this is in violation of the RBI’s Merchant Discount Rate (MDR) regulations.

What is MDR (Merchant Discount Rate)?

MDR is basically cost paid by a merchant to a bank for accepting payment from its customers via credit or debit cards every time a card is used in their stores. This essentially means that it is the merchant/trader who has to pay the MDR and not the customer.

Therefore levying ‘internet handling fee’ on customers is in violation of the MDR regulations and therefore illegal.

The RTI query to the Reserve Bank of India by Vijay Gopal, president of ‘Forum Against Corruption’ a body fighting against corruption, showed that a user doesn’t have to pay extra while booking movie tickets online through a mobile app or website.

The RBI stated that online platforms through which movie tickets are booked, do not hold the authority to levy handling fees from customers. The reply further explains that this is in violation of the RBI’s Merchant Discount Rate (MDR) regulations.

Illegal charges – Internet handling fee:

MDR is the cost paid by a merchant to a bank for accepting payment from its customers via credit or debit cards every time a card is used in their stores. A cost which by its definition means that it should be borne by the merchant/trader and not the customer.

However, today’s platforms such as BookMyShow, Paytm and PVR cinemas continue to charge exorbitant ‘internet handling fee’ from customers, which is in violation of the MDR regulations and therefore illegal.

Public action :

Those who want to complain about these problems against such RBI regulated entities can do so now.  To report a violation by a merchant, one has to approach the bank that is being used by the merchant to make the transaction.  But in a majority of cases, the information is often not available to the customer who is making the payment.

If the bank rejects to take action within 30 days or if the bank answers negatively, the consumer can approach the office of the Banking Ombudsman.

Statistics – Internet handling fee :

Network18, the investor company of BookMyShow reported consolidated revenues of rs.1538 crore for the quarter ended 31st December 2018.  It shows a 250% jump from the same quarter last year.

BookMyShow witnessed a 7 million app downloads. The aggregator managed ticketing for Pro-Kabbadi League for 4 teams, football league ISL 2018 and to some of the electronic music events. 

Last year in July,  Big Tree Entertainment the parent company of BookMyShow  raised a series of D funding of $100 million led by TPG Growth, with participation from existing investors.

How the Internet handling fee is charged?

For example if a customer purchases a premium ticket at the Cinepolis in Orion East Mall, Bengaluru, the customer have to pay a total of  Rs.297.46 which also includes the original ticket price of Rs.260 plus Rs.32 as ‘booking fees’ and IGST amounting to Rs.5.76.

Online booking sites serving movie buffs are passing on the burden to the customers. 

This looks like a daylight robbery by the service providers.  Strict regulations are the need of the hour.

Leave Your Comment