In a setback to Direct-to-Home (DTH) service providers, the Jharkhand High Court has upheld the State Government’s law to impose entertainment tax on them.

“The Jharkhand Entertai-nment Act does not encroach upon the field of Union legislation and the levy of tax on “entertainment” through DTH by the State legislature is not unconstitutional,” a division bench comprising Chief Justice R Banumathi and Justice Aparesh Kumar Singh observed. Several DTH service providers, including Tata Sky, Bharti Telemedia, Bharat Business Channel ltd, Dish TV India limited, Reliance BIG TV ltd had challenged various provisions of Jharkhand Entertainment Tax, 2012,

seeking to declaring them as ultra vires the Constitution as the Act seeks to impose entertainment tax on DTH. Commercial Taxes Secretary Mast Ram Meena told The Pioneer that the High Court order will immediately get around Rs 30 crore for the State and will result into netting around Rs 15 crore as tax every year.

The DTH providers’ contention was that such levy of entertainment tax at the rate of 10 per cent was, in substance, levy of service tax referable to Entry 92C of list I of the Seventh Schedule of the Constitution of India and was thus, beyond the competence of the State legislature. They also said that the levy of entertainment tax under Jharkhand Entertainment Tax Act, 2012 is in pith and substance, a tax on the provision of “service” which is levied by the Government of India and the Act encroaches upon the power of Union of India to levy “service tax” on a provider of DTH signals and is therefore, unconstitutional and liable to be held as ultra vires the Constitution of India.

The court, however, in its voluminous 81-page judgment said that Jharkhand Entertainment Tax Act, 2012 levying tax on “entertainment” through Direct-to-Home (DTH) in pith and substance, is on entertainment which falls under Entry 62 of list II of the Seventh Schedule. “The levy of entertainment tax is different from the levy of tax on broadcasting service,” the bench said.

“There is no transgression or encroachment upon the field of Union legislation and the levy of tax on “entertainment” through DTH by the State legislature is not ultra vires the power of the State legislature provided under Seventh Schedule of the Constitution,” the court observed. The court also said that “Entertainment” as defined under the Jharkhand Entertainment Tax Act, 2012 is not broadcasting service, but only entertainment and State legislature is competent to levy tax on the entertainment.

The bench observed that in view of the fine distinction between DTH service and cable TV, levy of “entertainment tax” at the rate of 10 per cent on DTH service vis-à-vis 7.5 per cent on the “entertainment” through cable TV, is also not discriminatory. “There is no difference in the service provided by the DTH service provider with that of cable operator. Both provide vehicle to transfer the content which provides entertainment. The tax is on entertainment and not the manner it reaches the consumer. The subject matter of tax is entertainment provided through the content that flows through DTH service provider system i.e. the subject matter of tax and not the service enabling the flow of content through the DTH system,” the court concluded.