The Supreme Court will review the applicability of Entertainment Tax on online ticket booking charges. This inquiry originated from a Madras High Court ruling, which stated that the Tamil Nadu Entertainment Tax Act, 1939, could not impose a tax on internet services offered by cinema owners.

During the hearing of a Special Leave Petition (SLP) filed by a Commercial Tax officer, Justice BV Nagarathna commented that the additional charge for online ticket booking is not for entertainment purposes but rather for the convenience of allowing people to book tickets online without needing to travel 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 contested order, the High Court reasoned that payments related to entertainment are taxable under the Tamil Nadu Entertainment Tax Act, 1939, only if they are a condition for entry. The Court opined that online booking charges or internet handling fees are not mandatory payments for entering a cinema hall, stating:

“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 stated that Entertainment Tax applies solely to the cost of a ticket, which grants a person 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