Is Entertainment Tax Applicable To Online Cinema Ticket Booking Charges? Supreme Court To Decide

The genesis of this stems from the order passed by the Madras High Court observing that the Tamil Nadu Entertainment Tax Act, 1939 could not have provided for the levy of tax on the internet service provided by the cinema owner.

While hearing an SLP filed against this by a Commercial Tax officer, Justice BV Nagarathna orally remarked that this extra charge is not for entertainment but it is for the convenience of the people who can book the ticket online without having to travel all the way to the cinema theatres. Though the bench, also comprising Justice Nongmeikapam Kotiswar Singh, was not inclined to entertain the matter, it decided to take up next week to pass the required order.

“This is not for entertainment. Entertainment is watching the movie. This is so that you do not need to travel all the way to the cinema theatre and can book tickets by sitting at your home. Therefore, you pay extra for the service provided…. If you want to buy the tickets from your home, you need not travel 10 or 20 km, and for that, you pay 30 rs extra...”

In the impugned order, the High Court reasoned that the payment made for any other purpose connected with such entertainment would be taxable under the said Act only if the person is required to make such payment as a condition for entry. Opining that the online booking charges or internet handling charges are not a mandatory payment for entering a cinema hall, the Court said:

“It is an additional payment for extra or other facility provided by the Cinema hall owner. With the advent of internet, much after the said enactment of 1939, even though amended from time to time, the said Act could not have provided for levy of tax on the service of internet provided by the cinema owner.”

It said that Entertainment Tax is a tax leviable only on cost of ticket which entitles a person to gain entry into the cinema hall or theatre.

“The mandatory requirement to fall within Section 3(7)(c) of the Act is that a person is required to make, as a condition to attend or continue to attend the entertainment. There is no doubt that booking of a cinema ticket on online basis is not a mandatory condition for all cinema goers, and this is not only optional but altogether a separate facility provided to all on the Web portal of the cinema hall owner.”

Case Details: THE COMMERCIAL TAX OFFICER VS. AGS CINEMAS PRIVATE LIMITED., DIARY NO. - 13928/2022