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With the Supreme Court’s recent ruling allowing both the Centre and states to levy separate taxes on television broadcasters, legal and industry experts warn that this could set a precedent for future taxes on digital services like OTT platforms and social media under the label of “entertainment.”
While the apex court clarified that service and entertainment are separate aspects that can be taxed by different authorities, experts believe the judgment, though based on older pre-GST laws, could lead to confusion and heavier tax burdens in today’s digital age.
Legal interpretation and industry impact
Rohit Jain, Managing Partner at Singhania & Co., questioned the foundational logic of the ruling. “There is a difference between ‘entertainment’ and ‘entertainments’. The term used in the Constitution is not just a plural but a legal term with a specific scope,” he said.
Jain expressed concern that the ruling could be misused by states to tax newer forms of private entertainment, such as OTT and social media platforms.
“The judgment should be reviewed,” he added, warning that “this could now encourage states to expand entertainment tax to the digital domain.”
Broadcast experts feared that the state authorities might begin taxing digital content under ‘entertainment’.
“The fear is that state authorities might start testing the waters by taxing digital content under ‘entertainment’—despite GST supposedly streamlining these regimes. For broadcasters already grappling with declining ad revenues and subscriber churn, the last thing we need is another layer of tax unpredictability,” said an industry expert.
Rajiv Khattar, a broadcast expert, echoed the concern. “The judgment has far-reaching consequences,” he said. “With the introduction of GST, operators believed entertainment tax was subsumed. But this ruling reopens the possibility of local bodies reintroducing such levies.” He cautioned that if other states follow suit, it could severely strain DTH and MSO operators already struggling with stagnant subscription revenues.
Mallika Joshi, Managing Partner at Law Offices of MSV, provided a detailed legal analysis, stating that the Court relied on the aspect theory—a legal principle allowing different taxes on different aspects of the same activity. “Broadcasting is a service, hence taxable by the Centre, while the content being consumed is entertainment, giving the state the power to tax it as well,” she explained.
Joshi noted that while the ruling has significant financial implications, its direct effect is limited to legacy disputes predating the GST regime.
However, she also warned that the decision may set a precedent for future taxation challenges involving digital content and OTT platforms. “Though this relates to pre-GST law, the aspect theory upheld by the Court may influence similar disputes in the future,” she said.
Ankit Jain, Partner at Ved Jain and Associates, emphasized that the ruling confirms a key constitutional principle: different levels of government can tax different parts of the same transaction.
“This principle isn’t limited to broadcasting. For example, the sale of a car attracts both GST and state registration fees,” he said. “Similarly, IPL tickets in Tamil Nadu are subject to both GST and entertainment tax.”
Dual taxation valid but complex
However, SR Patnaik, Partner and Head of Taxation at Cyril Amarchand Mangaldas, noted that the ruling reaffirms the constitutionality of dual taxation where distinct aspects fall under different constitutional entries.
“While service tax is now part of GST, Entry 62 of the State List still permits states—through local bodies—to regulate and potentially tax entertainment. This could extend to digital and broadcast content,” he said.
Patnaik advised that with the changing nature of content delivery—especially across OTT and digital platforms—industry players need to be cautious.
“Compliance will now depend heavily on how services are classified and where they are consumed. Operators should prepare for a more fragmented and jurisdiction-sensitive regulatory environment,” he noted.
In its judgment dated May 22, a bench of Justices B.V. Nagarathna and N.K. Singh upheld the constitutional validity of dual taxation, clarifying that broadcasting involves two separate elements—provision of service and delivery of entertainment. As such, service tax falls under the Centre’s authority via Entry 97 of List I (Union List), while entertainment tax is within the State’s domain under Entry 62 of List II (State List).
“There is no overlapping in fact or law,” the Court held, noting that each level of government is taxing a different aspect of the same transaction.
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