The Bombay high court on August 6 upheld the constitutional validity and reasonableness of a 2014 amendment to the Maharashtra Entertainments Duty Act. This amendment empowered a levy of entertainment tax on convenience fees exceeding Rs. 10 by online ticketing platforms and cinemas for virtual booking.
The high court dismissed two petitions filed almost a decade ago, challenging the state’s move. An interim stay on the levy, though, will continue for another four weeks, the HC said, to enable an appeal. One petition was filed by the FICCI-Multiplex Association of India, based in Delhi, and its Pune-based secretary, D.D. Chaphalkar, while the other was filed by Big Tree Entertainment and its director, Rajesh Balpande, in Bombay to challenge the validity of the state’s move to levy and collect entertainment tax on convenience fees for online ticket booking.
The state had issued the GR on December 29, 2014. By the amendment, it inserted a provision to the MED Act to exclude taxing of convenience fees up to Rs. 10 either by multiplex owners or online, provided data was submitted before the seventh day of the succeeding month; but any amount of Rs. 10 or more would be considered as admission fee and suitably taxed.
A division bench of Justices M.S. Sonak and Jitendra Jain held on August 6 that the argument that the state lacked the power to levy entertainment tax on the activity of providing convenience through online ticket booking was based on the incorrect assumption that online ticket booking constituted a separate business activity. Under the Maharashtra Entertainments Duty Act, duty is levied on admission to the entertainment venue, and for calculating the duty, one of the measures of tax to be included is the amount charged as convenience fees. The bench explained that the “petitioners are not justified in claiming that the activity of online ticket booking is a separate activity intended to be taxed under” a list covered by the Centre. The HC said that if an individual buys a ticket online, the charges paid as convenience fees would be regarded as condition for attending the entertainment, and thus these would fall within the scope of the measure of tax.
