In a significant ruling impacting the broadcasting industry, the Supreme Court has upheld the levy of both service tax by the Union government and entertainment tax by the state governments on broadcasters. The apex court stated that broadcasters are liable to pay both taxes for delivering content to subscribers, affirming the legislative competence of both the Parliament and the state legislatures in this matter.
A bench comprising Justices B.V. Nagarathna and N. Kotiswar Singh ruled that while broadcasting is a single activity, it encompasses two distinct taxable aspects: the service of transmission (taxable by the Centre) and the entertainment provided (taxable by the states as a form of luxury). The court clarified that there is no overlapping in these taxes as they target different facets of the same activity, drawing their authority from different entries in the Constitution’s Seventh Schedule – Entry 97 of the Union List for service tax and Entry 62 of the State List for entertainment tax.
The judgement came on a batch of appeals, including one led by the State of Kerala Vs Asianet Satellite Communications, where broadcasters had contested the imposition of state entertainment tax, arguing they primarily provided signal transmission services subject to central tax. The Supreme Court rejected these arguments, overturning a 2012 Kerala High Court decision that had favored DTH operators.
Justice Nagarathna, who penned the 321-page judgement, explained that broadcasters not only transmit signals but also provide necessary equipment like Set-Top Boxes and viewing cards, which enable viewers to access and experience the entertainment. This dual role justifies taxation under both central and state laws. The court emphasized that no entertainment can reach viewers without the broadcaster transmitting signals and providing the means for their decryption and viewing.
The Supreme Court clarified that the differential tax treatment based on the technology used (cable TV vs. DTH) does not violate equality principles, reinforcing that both are engaged in providing entertainment and are thus liable to entertainment tax. This ruling brings clarity to a long-standing dispute and has significant financial implications for the broadcasting sector in India.
Key Highlights:
- The Supreme Court has upheld that broadcasters are liable to pay both service tax (levied by the Union) and entertainment tax (levied by the states).
- The court reasoned that broadcasting has two distinct aspects: service of transmission and the provision of entertainment, which fall under different constitutional powers of taxation.
- The ruling dismissed the arguments of broadcasters who claimed they should only be subject to service tax, emphasizing their role in providing entertainment through signal transmission and necessary equipment.
- This judgement clarifies the legality of dual taxation on broadcasters across India.