Supreme Court Upholds Dual Taxation On Broadcasting, Says States Can Levy Entertainment Tax Alongside Centre's Service Tax

While upholding the State's authority to impose entertainment tax on broadcasting services like cable TV, digital streaming, and OTT platforms, the Supreme Court held that both the Centre and the State are empowered to levy service tax and entertainment tax, respectively, on assessees such as cable operators and entertainment service providers.

The bench of Justices BV Nagarathna and N Kotiswar Singh held that broadcasting constitutes a form of communication, while entertainment falls under the category of luxuries as outlined in Entry 62 of List II. Applying the doctrine of pith and substance, it reasoned that entertainment can be delivered through means of communication, making broadcasting merely incidental to it. As such, it does not directly encroach upon matters within the Union List. Consequently, both taxes function within their respective constitutional spheres, allowing the Centre and the State to concurrently impose service tax and entertainment tax on the activities undertaken by an assessee.

“It may be that the activity of entertainment is achieved through communication and in that sense could be through the mode of broadcasting and in that sense, broadcasting and communication is for the purpose of the entertainment. Hence, in our view, the State Legislature were fully justified in imposing entertainment tax under Entry 62 – List II. That broad casting through T.V. cable network and cable operators is for carrying out the activity of entertainment and in pith and substance falls within the scope and ambit of Entry 62 – List II.”, the court said.

“The television entertainment provided by them (assesses-operators) through their modus operandi i.e., by broadcasting, is a luxury within the meaning of Entry 62 - List II. The assessees who are engaged in the activity of providing entertainment are liable to pay service tax on the activity of broadcasting under the provisions of the Finance Act, 1994 read with relevant amendments and are also liable to pay entertainment tax in terms of Entry 62 - List II as being a specie of luxuries. Therefore, both the taxes, one by the State Legislature and the other, by the Parliament are leviable on the activity of the assessees herein. This is because by rendering the service of broadcasting, the assesses are entertaining the subscribers within the meaning of Entry 62 - List II. There is no overlapping in fact or in law, inasmuch as different aspects of the same activity are being taxed under two different legislations by two different legislatures. This is because the activity of broadcasting is a service and liable to service tax imposed by the Parliament (Entry 97 – List I) and the activity of entertainment is a subject falling under Entry 62 - List II and therefore, the assessees herein are liable to pay entertainment tax as well. Hence, the State Legislatures as well as the Parliament, both have the legislative competence to levy entertainment tax as well as service tax respectively on the activity carried out by the assessees herein.”, the court observed.

“In conclusion we hold that the tax sought to be imposed by the State Legislatures by way of the impugned Acts, is traceable to the power conferred on the State Legislatures under Entry 62 - List II. The said entry contemplates imposition of taxes, inter alia, on the entire genus of “entertainments and amusements”. The pith and substance of the provisions of the State Act referred to above are in the realm of taxation of providers/receivers of entertainment/amusement as luxuries within the said Entry through the medium of television which involves broadcasting service which is regulated under Entry 31 – List I as a form of communication in accordance with Prasar Bharti Act, 1990.”, the court concluded.

Also From Judgment: Supreme Court Upholds Kerala's Luxury Tax On Cable TV As Constitutionally Valid

Case Title: THE STATE OF KERALA AND ANR. Versus ASIANET SATELLITE COMMUNICATIONS LTD. AND ORS. (and connect cases)

Citation : 2025 LiveLaw (SC) 611

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