The Supreme Courtroom’s current ruling allowing twin taxation on tv broadcasters might have far-reaching implications for over-the-top (OTT) platforms, subscription-based digital content material companies, and gaming purposes, business consultants have warned, in accordance with an Financial Instances report. The decision is anticipated to extend the tax burden and create uncertainty in a sector that has up to now operated underneath a streamlined Items and Companies Tax (GST) regime.
Twin Taxation Permitted
In its judgment dated Might 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 points—supply of service and provision of leisure—each of which may be taxed individually by completely 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 accordance with the report.
“This ruling is principally premised on the idea that each taxes cope with completely different points of broadcasting actions and therefore, there isn’t a overlap in taxing powers of the Centre and state,” mentioned Saloni Roy, Companion at Deloitte India, as cited within the report. Whereas the case pertains to the pre-GST period, Roy famous that the choice might have “important implications” for the digital content material business and has reintroduced a component of tax uncertainty.
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Side Idea
The judgment endorses the “side principle” in taxation, which permits completely different authorities to tax completely different parts of a single exercise. Based on Saurabh Agarwal, Companion at EY, this interpretation might pave the way in which for states to impose leisure levies on digital platforms resembling OTT companies, social media, and gaming apps. “This goes in opposition to the spirit of GST, which was designed to unify and exchange varied oblique taxes, together with leisure tax,” he reportedly mentioned.
“This ruling might pave the way in which 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 may occasionally pose a problem for the GST Council.
State-Stage Levies
A number of states have already enacted legal guidelines enabling such levies. As an illustration, the Haryana Municipal Leisure Responsibility Act, 2019 authorises duties on public leisure occasions, whereas the Maharashtra Entertainments Responsibility Act, 2023 contains direct-to-home (DTH) companies 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 for extra states taxing OTT platforms, content material creators and gaming purposes within the title of leisure. “There are lots of components which ought to act in opposition to larger taxes for digital media as an oblique impression of this judgment, together with the dearth of territoriality in supply of such companies,” mentioned Shashank Mishra, Companion, Shardul Amarchand Mangaldas & Co, in accordance with the report.
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