Media Industry to Challenge Karnataka’s New Tax on Entertainment

The media and entertainment industry is planning to ask the Karnataka government to reverse a new 1-2% tax on cinema tickets, TV, and OTT subscriptions. This new tax, called the Cine and Cultural Activists Welfare Cess, will also be applied to all revenue from related businesses like movie theaters, multiplexes, OTT platforms, and TV channels.

Industry groups, including the Indian Broadcasting and Digital Foundation (IBDF), Internet and Mobile Association of India (IAMAI), Multiplex Association of India (MAI), and Producers Guild of India (PGI), are likely to approach not only the state government but also the governor and the Ministry of Information and Broadcasting (MIB).

If the Karnataka government does not reverse the tax, these industry groups might challenge the Karnataka Cine & Cultural Activists Welfare Bill in court, arguing it should not apply to OTT platforms and TV channels.

A senior media executive, who chose to remain anonymous, expressed concern that this new tax could lead other states to pass similar laws, increasing costs for consumers. Legal experts warn that this tax could disrupt the uniform tax system intended by the Goods and Services Tax (GST) regime and create an uneven playing field for different entertainment forms. Abhishek Rastogi, founder of Rastogi Chambers, emphasized that such taxes should only be imposed under exceptional circumstances as they go against the principles of GST and could lead to constitutional debates.

The bill, which aims to create a welfare fund for artists and technicians in Karnataka’s film industry, has already been passed by the state legislature and is waiting for the governor’s approval.

Kamal Gianchandani, chief business planning and strategy officer at PVR Inox and president of MAI, stated that this tax will harm the industry. He added that it contradicts the ‘one nation-one tax’ principle under GST. While MAI plans to express their concerns to the state government, Gianchandani mentioned that taking legal action is also an option.