Media Industry Expected to Challenge Karnataka Government's Cess Levy

Media and entertainment industry groups are planning to defer representations to the Karnataka government for a swing of the 1-2% cess on cinema tickets besides TV and over-on-top(OTT) subscription fees, as people like the development.

The Cine and Cultural Activists Welfare Cess will be applied to all revenue causes from related venues, including cinema theaters, multiplexes, OTT platforms, TV channels, and establishments specified by the government.

In Addition to approaching the state government, industry bodies might also appeal to the governor and the Ministry of Information and Broadcasting (MIB), which oversees TV,OTT, and film industries. 

The industry bodies expected to submit representations include the Indian Broadcasting and Digital Foundation (IBDF), the Internet and Mobile Association of India (IAMAI), the Multiplex Association of India (MAI), and the Producers Guild of India (PGI). 

If the state government does not retract the cess on movie tickets and OTT subscriptions, the industry bodies may seek legal recourse by challenging the applicability of the Karnataka Cine & Cultural Activists Welfare Bill to OTT platforms and TV channels.

“The bill may lead to similar legislation being passed by other state governments. It would also lead to increased costs for consumers," a senior media executive said on condition of obscurity. 

Legal experts suggest that the proposed tax could undermine the uniform tax structure established by the Goods and Services Tax (GST) regime, leading to an uneven playing field across different forms of entertainment.  

"The imposition of any cess on a supply or consumption will lead to tax cascading and ultimately increase the price of the supply. The cess should be imposed only under exceptional circumstances, as such additional levies will be against the broad objectives of GST, thereby leading to constitutional debates," said Abhishek Rastogi, founder of Rastogi chambers.

The bill, aimed at creating a welfare fund for artists and technicians in Karnataka’s film industry, has been approved by both houses of the state legislature and is now awaiting the governor’s approval.

Kamal Gianchandani, Chief business Planning and Strategy Officer at PVR Inox and President of the Multiplex Association of India (MAI), stated that the cess would trouble the industry. He also explained that the cess undermines the ‘one nation-one tax’ principle of the GST regime. While MAI plans to express its concerns to the state government, Gianchandani mentioned that seeking legal recourse remains an option.