The Supreme Court docket’s latest ruling allowing twin taxation on tv broadcasters might have far-reaching implications for over-the-top (OTT) platforms, subscription-based digital content material providers, and gaming functions, business consultants have warned, in keeping with an Financial Instances report. The decision is anticipated to extend the tax burden and create uncertainty in a sector that has to this point operated underneath a streamlined Items and Companies Tax (GST) regime.
Twin Taxation Permitted
In its judgment dated Could 22 within the case of Asianet Satellite tv for pc Communications and Others, a bench comprising Justices B V Nagarathna and N Ok Singh held that broadcasting encompasses two distinct facets—supply of service and provision of leisure—each of which might be taxed individually by totally different authorities. This implies the centre can levy service tax on the act of broadcasting, whereas state governments might impose leisure tax on the content material consumed by viewers, in keeping with the report.
“This ruling is especially premised on the premise that each taxes take care of totally different facets of broadcasting actions and therefore, there isn’t any overlap in taxing powers of the Centre and state,” mentioned Saloni Roy, Associate at Deloitte India, as cited within the report. Whereas the case pertains to the pre-GST period, Roy famous that the choice might have “vital implications” for the digital content material business and has reintroduced a component of tax uncertainty.
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Side Concept
The judgment endorses the “side idea” in taxation, which permits totally different authorities to tax totally different components of a single exercise. In response to Saurabh Agarwal, Associate at EY, this interpretation might pave the best way for states to impose leisure levies on digital platforms akin to OTT providers, social media, and gaming apps. “This goes towards the spirit of GST, which was designed to unify and change varied oblique taxes, together with leisure tax,” he reportedly mentioned.
“This ruling might pave the best way for states and even native bodies-under Entry 62 of the Structure-to reintroduce such levies underneath the label of ‘leisure’,” Agarwal reportedly added, noting that this will likely pose a problem for the GST Council.
State-Degree Levies
A number of states have already enacted legal guidelines enabling such levies. For example, the Haryana Municipal Leisure Obligation Act, 2019 authorises duties on public leisure occasions, whereas the Maharashtra Entertainments Obligation Act, 2023 contains direct-to-home (DTH) providers inside its ambit. Tamil Nadu imposes each GST and leisure tax on Indian Premier League (IPL) match tickets.
The digital business underneath the streamlined tax regime underneath GST was conscious of the taxation burden, however this resolution reintroduces uncertainty, with the potential of extra states taxing OTT platforms, content material creators and gaming functions within the identify of leisure. “There are numerous elements which ought to act towards larger taxes for digital media as an oblique impression of this judgment, together with the shortage of territoriality in supply of such providers,” mentioned Shashank Mishra, Associate, Shardul Amarchand Mangaldas & Co, in keeping with the report.
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