Supreme Court Ruling on Dual Taxation for Broadcasters
The recent Supreme Court ruling may increase the tax burden on over-the-top (OTT) platforms, subscription-based digital content, and gaming applications.
Key Points of the Judgment
- The ruling was made in the case of Asianet Satellite Communications, with a bench including justices BV Nagarathna and NK Singh.
- The judgment allows for the dual taxation of broadcasting, differentiating between the delivery of service and delivery of entertainment.
- This permits the Centre to impose a service tax and states to charge an entertainment tax.
Implications of the Ruling
- Tax Uncertainty: The ruling introduces tax uncertainty for the industry, potentially decentralizing tax and opening the door to dual taxation on OTT services, gaming apps, and social media.
- Aspect Theory: Endorsing the aspect theory, the ruling allows different elements of the same activity to be taxed separately, which contrasts with the unified GST approach.
- State Empowerment: While GST was meant to streamline taxes, states and local bodies may reintroduce entertainment levies under Entry 62 of the Constitution.
State and Local Taxation
- States can levy entertainment tax through local bodies such as panchayats and municipalities.
- Examples:
- Haryana's Municipal Entertainment Duty Act, 2019 allows for duties on public entertainments.
- Maharashtra's Entertainments Duty Act, 2023 imposes duties on entertainment entry, collected by local bodies.
- Tamil Nadu applies both GST and entertainment tax on IPL match tickets.
Industry Concerns
- Reintroduced Uncertainty: The decision may lead to increased taxes on OTT platforms and digital content creators.
- Lack of Territoriality: Industry experts argue that factors such as the lack of territoriality should argue against higher taxes.