Supreme Court Upholds Kerala's Luxury Tax On Cable TV As Constitutionally Valid

The Supreme Court today (May 22) upheld the constitutional validity of the Kerala luxury tax and allowed Kerala's appeal, affirming the state's power to tax cable TV services under Entry 62 of List II (State List) as “luxury.”

The Court clarified that the service tax imposed by the Finance Act on broadcasting services under Entry 97 of List I (Union List) does not conflict with state taxes on entertainment, and therefore, no constitutional overlap exists between central and state levies.

“in the instant case, the Parliament under the Finance Act is not imposing a tax on entertainment. Such a tax is being imposed by the state legislatures as entertainment is a luxury within the meaning of entry 62 list 2. In the same way, the Finance Act along with its amendments seeks to impose a tax on the service record by the broadcasting agency which is imposed under Entry 97 List 1. In the same way, under Entry 62 List 2, the state governments are not imposing any service tax on the assesses.”, the court observed.

The bench comprising Justices BV Nagarathna and N Kotiswar Singh heard the case, which revolved around the imposition of luxury tax on cable television services in Kerala and the constitutional challenges arising from it

This case concerns the constitutional validity of Kerala's imposition of a luxury tax on cable TV services under the amended Kerala Tax on Luxuries Act, 2006. The Respondent-Asianet, a major cable operator, challenged the tax on two grounds: that cable services are not a “luxury” under constitutional interpretation, and that the tax was discriminatory as DTH providers were not similarly taxed.

The Kerala High Court initially upheld the levy, but later amendments exempted smaller operators (under 7,500 connections) and eventually all operators. The High Court later struck down these exemptions, holding them violative of Article 14 due to arbitrary classification, and also found the tax discriminatory against cable TV operators vis-à-vis DTH providers.

Following this, the State of Kerala appealed to the Supreme Court.

Invoking and clarifying the “aspect theory,” the judgment authored by Justice Nagarathna held that different aspects of a composite activity, such as broadcasting and the provision of entertainment, can be taxed by different levels of government without infringing upon each other's legislative competence. It emphasized that in India, unlike Canada, the aspect theory does not concern legislative competence but helps determine the nature of the taxable event.

“The aspect theory is used to determine if in fact there are different aspects within the activity sought to be taxed. And whether the taxable event which forms the basis of the levy in a legislative enactment corresponds to any aspect in the activity sought to be taxed. This is in contrast to the applicability of this theory in Canada where this theory is used to determine legislative competence of a federal or provincial legislature to enact a particular law. In a way, we are saying that the aspect theory is not concerning the legislative competence as such. And we have applied the theory to this case. And we say there is no overlapping in fact or in law.”, the court said.

The Court also ruled that the findings of the Kerala High Court regarding arbitrary exemptions had been correctly decided earlier and that the revised legislative framework by the State of Kerala was now constitutionally valid because of the State's power to levy a luxury tax on the cable TV service.

Accordingly, the appeal filed by the State of Kerala was allowed.

Case Title: THE STATE OF KERALA AND ANR. Versus ASIANET SATELLITE COMMUNICATIONS LTD. AND ORS.

Citation : 2025 LiveLaw (SC) 611

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