Entertainment Tax - in India

In India

In India, movie tickets, large commercial shows and large private festival celebrations may incur an entertainment tax.

Entertainment falls in List 2 of the Seventh Schedule of the Constitution of India and is exclusively reserved as a revenue source for the state governments. Historically, before India acquired independence British government imposed heavy taxes on the events of amusements and entertainment, where a large gathering of Indians could have caused rebellion or mutiny. Thus, various entertainment tax acts of the state governments permit the rate of tax beyond 100%. After independence, old enactments continued and there has been no revision or repeal of these acts.

This source of revenue has grown with the advent of Pay Television Services in India. Since, entertainment is being provided through the services such as Broadcasting Services, DTH Services, Pay TV Services, Cable Services, etc. The component of entertainment is intrinsicially intertwined in the transaction of service, that it can not be separated from the whole transaction. Given the nature of transaction of service, it is being subjected to tax by the Union and the State governments both.

The fiscal principle underlying article 246 of the constitution of India separates the sources of taxation for the Union and the States and also maintains the exclusivity. This article also provides that in case of conflict between the powers of Union and the States, the Union power to tax shall supersede the power of the State to levy tax on the taxable event or in relation to the subject or object of taxation.

The entertainment Industry in India is facing the challenge of double taxation on such transactions.