Media industry likely to seek reversal of Karnataka government decision on cess levy

Media and entertainment industry bodies are planning to submit representations to the Karnataka government for a reversal of the 1-2% cess on cinema tickets besides TV and over-the-top (OTT) subscription fees, people familiar with the development said.The Cine and Cultural Activists Welfare Cess will also be imposed on all revenue generated from related establishments such as cinema theatres, multiplex halls, OTT, TV channels and other such establishments notified by the government.

Apart from the state government, the industry bodies could also petition the governor and the ministry of information and broadcasting (MIB), the nodal ministry for TV, OTT and film industries, they added.

The industry bodies that are likely to make representations include 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).

If the state government refuses to roll back the cess on movie tickets and OTT subscriptions, the industry bodies could also seek legal remedy by challenging the Karnataka Cine & Cultural Activists Welfare Bill’s applicability 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 anonymity.Legal experts say that the proposed tax would disrupt the uniform tax structure envisaged under the Goods and Services Tax (GST) regime and create an uneven playing field for various 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, which seeks to establish a welfare fund for artists and technicians in the film industry in Karnataka, has been passed by both houses of the state legislature and is awaiting the governor’s assent.

PVR Inox chief business planning and strategy officer Kamal Gianchandani, who is also the president of MAI, said that the cess will be detrimental for the industry.

He also said the cess defeats the purpose of ‘one nation-one tax’ under the GST regime. While stating that MAI will raise its concerns with the state government, Gianchandani said legal remedy is always an option.