The Telegraph
Friday , January 31 , 2014
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Tax to hike cable TV rates

Ranchi/Calcutta, Jan. 30: Jharkhand High Court today upheld imposition of entertainment tax by the state government on cable and direct to home (DTH) services, making television viewing a slightly more expensive proposition for some viewers.

While cable services provided by local operators will be charged at 7.5 per cent, DTH services will be levied a 10 per cent entertainment tax.

But DTH subscribers like, say, Tata Sky or Dish TV, will probably be spared the hike. That’s because most of these companies, which offer services throughout the country, absorb these taxes — and a licence fee — while charging the consumer.

Company sources claimed the idea was to ensure that their rates remained uniform nationally.

At least Tata Sky, one of the five companies that challenged the provisions of Jharkhand Entertainment Tax Act, 2012, has clarified that their rates would remain unchanged in spite of today’s order.

“Tata Sky will continue to absorb the service tax, the entertainment tax and the DTH licence fee so that our advertised rates remain uniform throughout the country,” Vikram Mehra, chief commercial officer, told The Telegraph.

Today, a division bench of Chief Justice R. Banumathi and Aparesh Kumar Singh dismissed the five petitions filed by DTH companies Ms. Bharti Telemedia Limited, Tata Sky Limited, Bharat Business Channel Limited, Dish TV India Limited and Reliance BIG TV Ltd.

Challenging the provision of the act, the companies questioned the state government’s authority to impose entertainment tax when they had already obtained licenses from the Union government.

The companies held that they had deposited license fees of Rs 10 crore and furnished a bank guarantee of Rs 40 crore for operating for a period of 10 years. They were also due to deposit an annual fee equivalent to 10 per cent of its gross revenue in a financial year.

Advocates representing the DTH companies said the service provided by them was pre-paid, wherein the subscriber was required to purchase recharge vouchers to top-up his/her balance.

Monthly charges varied from Rs 160 to Rs 300 depending on the number of channels subscribed to.

Senior advocates Binod Poddar, Binod Kanth and advocate Indrajit Sinha, who appeared for the companies, argued that the state was infringing on the rights of the Centre by imposing entertainment tax on the provision of “service”, a tax on which was levied by the Union government.

Arguing on behalf of the state government, advocate A. R. Choudhary said DTH service had two aspects: one, to provide “service” and the other to provide “entertainment”.

He explained that entertainment tax of 10 per cent on DTH service providers and 7.5 per cent on cable operators was tax levied on the entertainment part. This, he said, was within the legislative competence of the state and was not in contravention with either central legislation or the constitutional arrangement with regard to realisation of taxes.

In its 81-page judgement, the court observed that “entertainment” was separate from the “service” provided by DTH companies, and that “entertainment” had been defined in the Jharkhand Entertainment Tax Act, 2012.

The order of the high court is expected to add around Rs 30 crore per annum.

Sources in the state’s commercial taxes department, which would levy the entertainment tax, said that after today’s court verdict, they would issue notices to DTH and cable operators soon.

“We hope entertainment tax would be imposed within a couple of months,” said a senior official of the department.

Cable operators did not foresee the tax denting demand. “Now customers pay anything between Rs 150 to Rs 300 for cable services depending on the number of channels they subscribe to,” said Jaishankar Choudhary, an Upper Bazar cable operator.

“If the tax is imposed, the monthly charges will increase marginally,” he added.

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