The press and electronic media derive their rights from the freedom of speech
and expression available to the ordinary citizen under Article 19(1)(a) of the
Constitution. The media enjoys no higher status than the ordinary citizen and is
subject to the general laws of the land, including those relating to
As the press enjoys no special status and is subject to the general laws of the
land and it is subject to general taxes including income tax. Aside from general
laws, there are specific taxes that are imposed on the print and electronic
media which include sales tax, entertainment tax, luxury tax, and taxes on
professions, callings, and employments. The cases that have reached the Supreme
Court on the subject, have essentially concerning challenges on the competence
of the legislature to impose the levy or where the tax abridges the right to
freedom of speech and expression under Article 19(1)(a) of the Constitution.
The relevant provisions on the power to tax the media and entertainment include
Entry 92 of List I and Entry 62 of List II in the Seventh Schedule to the
Supreme Court judgments on taxation of the Entertainment
Tax on the provider
In Western India Theatres Ltd. v Cantonment Board
, the petitioners questioned
the validity of a tax on the giver of entertainment under Section 60,
Cantonments Act, 1924 Tracing the history of the competence of the legislature
to impose such a tax, the Supreme Court cited Section 100, Government of India
Act, 1935 read with Entry 50 in the Seventh Schedule thereto, under which the
provincial legislature had the power to make law with respect to "taxes on
luxuries, including taxes on entertainments, amusements, betting and gambling".
That being the position, the Supreme Court held that there was no reason to
differentiate between the giver and the receiver of the luxuries, entertainment
or amusement in question and both could, with equal propriety, be made amenable
to the tax It was further held that the impugned tax was not a tax imposed for
the privilege of carrying on any trade or calling but a tax imposed on every
show or every instance of the exercise of the particular trade, calling or
State Government's power to tax cinema
In Y.V. Srinivasamurthy v. State of Mysore
, in a challenge to the Karnataka
Cinematograph Shows Tax Act, 1951, it was held by the Supreme Court that the
legislation being law for the matters enumerated in Entry 62 of List II to the
Seventh Schedule of the Constitution (taxes on luxuries including taxes on
entertainments, amusements, betting and gambling) and not a law made for matters
under Entry 60 of List II (taxes on professions, trades, callings, and
employments), it could not be contended that the amount of tax could not exceed
the amount permitted under Article 276(2) of the Constitution.
that a law enacted for Entry 62 could not permit the imposition of taxes on
cinemas, was also rejected since it was held that the words entertainments
"amusements" were wide enough to include theatres, dramatic performances,
cinemas, sports, and the like. Merely because the word cinema
Entry 33 of List II (theatres and dramatic performances, cinemas subject to the
provisions of Entry 60 of List I; sports, entertainments, and amusements). had
been omitted from Entry 62 did not mean that the State Legislatures lack the
competence to enact laws imposing a tax on cinema.
Taxes on cinema theatres based on collection capacity
In Venkateshwara Theatre v. State of A.P.
, the Supreme Court dismissed a
challenge to an amendment to the A.P. Entertainments Tax Act, 1939 whereby a
consolidated levy based on estimated gross collection capacity was imposed on
cinema theatres depending on the type of theatre and its location, but without
reference to the actual amount collected, or the actual number of tickets sold,
or persons admitted.
The court held that although the mode of levy of the tax
had been altered by the impugned amendment, the alteration was not such as to
alter the subject of the tax which was well within the scope of Entry 62 of List
II of the Seventh Schedule to the Constitution.
Taxes on entertainment: The scope of the expression entertainment
In Geeta Enterprises v. State of U.P
., the Supreme Court discussed the
ambit and scope of the expression, entertainment
in the context of the U.P.
Entertainment and Betting Tax Act, 1937. The petitioner ran a video parlour
where machines were installed for showing sports and games which, according to
the petitioner, provided educational entertainment.
There was no admission fee
charged to view the show but persons who wished to operate the machine for a
show of 30 seconds were required to insert a coin of 50 paise into an in-built
box, the key to which was retained by the manufacturer. Periodically, the
manufacturer's representative would come to the parlour to collect the proceeds
from the box and would pay over to the petitioner, its shares from the proceeds.
The petitioner contended that how the game was operated did not amount to
"entertainment" under Section 2(3), U.P. Entertainment and Betting Tax Act,
1937. Rejecting the petitioner's contentions, the Supreme Court held that to
fall within the ambit of "entertainment" under Section 2(3), the show must pass
the following tests, which in the facts of the case, it did:
- The show, performance, game, or sport must contain a public col our in that
the show should be open to the public in a hall, theatre, or any other place,
where members of the public are invited to attend the show.
- The show must provide any kind of amusement whether sport, game or even
performance which requires some amount of skill. The element of skill is not
a determining factor for "entertainment" as a receiver of entertainment
would derive pleasure and be entertained, regardless of whether he possesses
Although admission to the hall may be free, if the exhibitor derives some
benefit in terms of money, it would be deemed to be "entertainment". The mere
fact that payment is not made at the time of entering the premises, is
irrelevant. Payment made at a later stage is, nonetheless, payment in
consideration for being admitted to a place of entertainment.
This judgment was followed in Standard Games v. State of U.P.
 and State of M.P. v. Abha Sethi.
 Likewise, in State of M.P. v. Home Decorators & Finance
,33 it was held that where invitation cards and membership cards were
issued on payment at the gate, where the entertainment program was organized,
the issue of cards amounts to the sale of tickets and was liable to
In the case of M/S.P.V. R Ltd. vs. C.T.O
., the Madras High Court held that
Online booking charges or internet handling charges were not a mandatory payment
for entering the cinema hall, it was an additional payment for extra or other
facilities provided by the Cinema Hall owner thus, the same could not be
subjected to entertainment tax.
In Balaji Theatre v. Chief Secretary, it has further been provided that
service tax and entertainment tax are under different enactment by different
authorities. Admission into the Cinema theatre is treated as a service on which
GST is levied. On such admission, the viewer gets the entertainment on which tax
is levied by the local authorities as 'Entertainment Tax'. Thus, the
entertainment itself being a different content, will not fit into the act of
service provided by the theatre owner viz., admission of the viewer into the
On the Constitutional aspect, the High Court has provided that
Entry 62 of the State List of the Seventh Schedule of the Constitution of India,
as amended by the Constitution (101 Amendment) Act, 2016, provides that the
taxes on luxuries including the taxes on entertainment, amusements, betting and
gambling are taxes authorized by law and the authorities empowered under the
relevant provisions of law to collect the said taxes are justified in doing so.
Therefore, going by the above constitutional provision the collection of the
entertainment tax by the Municipality is within their power, competence, and
authority of law.
Entertainment tax is inclusive of the tickets we buy to watch movies or
large-scale entertainment shows. A few prominent features of entertainment tax
are as follows:
- This tax is applicable for any form of entertainment all over the
country and is a part of the different costs borne by customers.
- The authorities responsible for the collection of entertainment tax from
customers are the State governments.
- In the country, entertainment tax is different for different states as
it falls under the purview of the state governments.
- All the rules and guidelines that apply to the entertainment tax in
India are listed in Article 246 of the Indian constitution
- Entertainment tax is also applicable on the below-mentioned categories
of entertainment as well:
- Celebrity Stage Shows
- Theatre Shows
- Video Games
- Activities related to sports
- Amusement Parks
If suppose M/s. A Ltd has organized a fashion event in Delhi wherein the art of
all the fashion designers is being showcased. Further, if any person is
interested in creativity, then he can contact the designer and can start
business relations with him/her. The said fashion show is a mix of musical
performances by top-class DJs, dance performances by celebrities, etc. Thus, the
said event is a mix of business as well as entertainment and the entry charge is
Rs. 10,000/- per participant. (Whether service tax is payable on the same)
Service tax is not applicable on the instant transaction because the said event
is an entertainment event since such an event is intended to provide recreation,
pastime, fun, or enjoyment by way of exhibition of dance, musical performances.
Further, it also provides business opportunities. However, on analyzing the
definition carefully, it can be said that the element of provision of business
opportunities being present, does not debar the said event from being classified
as an entertainment event
. Further, the Supreme Court has held that
fashion shows are entertainment events. Therefore, service tax is not applicable
on instant transactions.
Following events are specifically included in the definition of Entertainment
Event. The principle of ejusdem generis should be applied while interpreting
this definition. The definition specifically mentions the term by way of
which restrict the scope of the events to the following:
- Exhibition of the cinematograph film
- Sporting event
- Award functions
- Dance, musical or theatrical performances
So, if we see the case of movie ticket the concept of entertainment and taxes
are connected in a way that ticket purchaser purchases the ticket to watch and
the amount they pay could be the sum service plus tax as they are being
entertained and getting some service in Cinema Hall. In another way, the Cinema
Hall owner pays the entertainment tax as well as service tax as the owner
renders both. As there is a chance of a double cascading effect GST was
introduced to bring all indirect taxes under one roof. (Movie tickets end up
attracting 28% GST)
The Tax applicability area in Films
At times, a film is co-produced by two or more parties. In such a situation, one
should evaluate the issue of association of persons (AOP). The implication of
being treated as an AOP is that this is considered a separate entity for tax
purposes. The term "AOP" has not been defined under the tax laws. The CBDT has
recently clarified what does not constitute an AOP in the context of
engineering, procurement, and construction contracts/turnkey contracts.
Customs duty on filming equipment
The Admission Temporaire/Temporary Admission (ATA) Carnet permits duty-free
temporary admission of goods into a member country. The list of exempted
products includes filming equipment. However, there is no corresponding customs
notification granting an exemption on import filming equipment on lines of ATA
Film production equipment is very expensive and is not easily available in all
countries, thereby compelling the film producers to import them temporarily on
lease to produce the film. Customs duty cost significantly increases the burden
of tax on film producers.
Indian Film Shot Overseas
In Common Indian film plan, some schedule outside the Indian jurisdiction and in
that Case the Indian Produce contract with the line produces to assist with the
shooting, in return the producer pay the fee for it just like in the case of a
It may be noted that the taxability/ withholding tax applicability on line
producer fees should be evaluated based on the contractual terms (i.e.
role/responsibilities) agreed and documented between the parties. Payment of
line producer fees would also need to be examined from a service tax perspective
(implications under reverse charge mechanism for the film producer) depending
upon the nature of service and POPS Rules.
Film distribution rights
Film distribution typically involves a grant of license i.e., film distribution
rights. The film intellectual property continues to be owned by the film
producer under this model.
At times, a comprehensive agreement is entered into covering various modes of
film distribution for a lump sum consideration. It may be advisable for
taxpayers to bifurcate the consideration for various distribution rights from a
tax risk management perspective.
Indirect tax on film distribution rights
Temporary transfer or permitting use or enjoyment of any IPR is liable to
service tax. Grant of license for the theatrical release of the film is exempted
from service tax, whereas grant of license of non-theatrical rights being
television right, internet right, etc. by producers attracts service tax.
IPR such as trademarks, copyrights are typically treated as 'goods' under the
State VAT legislation and therefore their transfer/license of distribution
rights attracts VAT.
The above results in dual taxation and further exempt income may entail
significant reversals of cenvat credit adding cost to the business. Also,
typically VAT paid on licensing of IPR is not available as credit to the
licensee under the State VAT laws, making it more expensive for business.
At times, post-production work including VFX is outsourced to a foreign company
and the Indian film producer pays postproduction fees to such foreign company.
The issue which arises in such cases is whether such post-production fees amount
to fees for technical services under the relevant tax treaty/domestic tax laws
and accordingly trigger withholding tax applicability.
This would depend upon the specific services provided, documentation of the same
in the contract, and the relevant tax treaty provisions as regards the
provisions of fees for technical services
Post-production in India
India is increasingly becoming the outsourced post-production service provider
to many foreign film producers.
Generally, the content is temporarily imported into India for carrying out
post-production activity. On completion of such activity, the processed content
is re-exported for its use outside India. On import of the content in tangible
media, customs duty becomes payable and service tax is applicable on the value
of post-production services rendered. This is contrary to other back-office
service activities carried out in India where the export benefit is provided,
thereby making the Indian post-production sector less competitive.
Exhibition of films
Producers, distributors, sub-distributors, exhibitors of films enter into
different kinds of arrangements for the exhibition of movies. These arrangements
are either entered into on a principal-to-principal basis (where films are
exhibited by the exhibitor on his/her account) or on behalf of the
distributor/sub-distributor/producer, or on a revenue-sharing basis.
CBEC has clarified that the levy of service tax would not depend on the nature
of such arrangements but the nature of the transaction involved. As a result, it
has been clarified that service tax would be applicable on the exhibition of
films by the exhibitor, whether on a principal-to-principal basis or behalf of
the distributor/sub-distributor/producer or on a revenue-sharing basis.
Foreign films shot in India
The taxability of foreign actors is covered under Article 17 of tax treaties
(Taxation of entertainers and sportsperson). Income from personal activities, as
such, performed in India (i.e. performance in India) should be taxable in India
irrespective of whether or not such action is an employee. In case the
performance income of such an actor accrues not to the actor but another
person/entity, such income should still be taxable in India [Article 17(2)].
This is an anti-avoidance measure included in tax treaties. The foreign crew
would include behind the scene technicians. The taxability of their income
should be evaluated based on criteria such as nature of services, legal form of
entity, presence/period of stay in India, relevant tax treaty provisions.
Tax clearance certificate
Individuals (e.g., foreign film actors), not domiciled in India, who visit India
for purposes of business/profession and earn income from a source in India, are
required to obtain a tax clearance certificate from the Revenue authorities
before departing India.
Film producer filings
A film producer is required to furnish a prescribed statement (Form No 52A)
outlining the details of expenses incurred. Such statement is required to be
submitted per film per year within 30 days from the end of the financial year or
completion of the film, whichever is earlier. It may be noted that the term
"film producer" has not been defined under the tax laws and this issue is
aggravated by the new business models.
Some other kinds of the area like film incentives, the deduction for the cost of
production of films, abandoned films there are certain kind of tax applicability
by the law
Indirect tax challenges faced by the film industry
The film industry is subjected to multiple taxes at various points in its supply
chain, without the availability of credit in most cases.
Various transactions/activities attract different types of indirect taxes. In
most cases, taxes paid on procurements are not available as credit while paying
taxes on the revenues. For instance, service tax (levied by Central Government)
charged by technicians to the producer is not available as credit while making
payment of VAT (levied by State Government) on grant of distribution rights by
Similarly, VAT/service tax charged to the distributors on their costs is not
available as a credit against the entertainment tax liability of the
distributor/exhibitor. Without adequate service tax liability, producers are not
able to utilize the service tax credit charged by such artists, resulting in tax
cascading and an increase in the cost of film production.
We pay taxes differently in everyday life, with or without realising it, whether
we buy goods or provide services, we pay the marginal amount of tax on such
goods and services without even realising it. So, the same goes with Film
Industry as they are subjected to Entertainment Tax, and with the concept of GST,
the whole taxation in India noticed a change in tax laws and these changes
impacted many Indirect tax paying sectors in different ways. As it helps the
consumer by paying little tax on the ticket, food, and beverages by reducing the
cost and for the producers, studios, distributors, and exhibitors to pay one tax
at one time.
As mentioned, above the tax system in India Film Industry mostly deal with all
indirect taxes, and by the implementation of a new indirect regime, the Goods
and Service Tax (GST), on 1 July 2017 by keeping aside all the types of indirect
taxes in Central and State to provide a common marketplace with 'one nation, one
tax' and this concept created an impact on the industry with pros and cons.
So, entertainment tax needs a proper understanding in the era of GST because it
helps in identifying the related sector for the GST applicability, improving the
effective tax rate, and managing tax risk.
When we look at entertainment in a broader sense, we see that OTT entertainment
is dubious since there is no effective tax control. So for this, there is a need
to understand the applicability of Entertainment Tax in the Film Industry as OTT
is a kind of service exhibiting films.
- Madhavi Gordadia Divan, FACTS OF MEDIA LAW, pg.222 (2d ed. 2013).
- AIR 1959 SC 582: 1959 Supp (2) SCR 63.
- AIR 1959 SC 894.
- AIR 1993 SC 1947.
- AIR 1983 SC 1098
- AIR 1997 SC 285.
- AIR 1999 SC 2271.
-  118 taxmann.com 160 (Madras)
- Amit Kumar vs. State of U.P, AIR 2008 SC 592.
- Background Material on Service Tax-Entertainment Sector by The Institute
of Chartered Accountants of India.
- Media and Entertainment Industry India tax landscape, Deloitte, June
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