Karnataka High Court Addresses 2% Cinema Cess Dispute
The Karnataka High Court has solicited a response from the state government regarding a legal challenge against the imposition of a 2% cess on cinema ticket sales. This levy is outlined under the Karnataka Cine and Cultural Activists (Welfare) Act, 2024. The case, initiated by the Multiplex Association of India (MAI), PVR INOX Ltd, and its shareholder Shantanu Pai, contends that the cess is being unlawfully enforced.
Challenge to Cess Implementation
Justice H.T. Narendra Prasad has issued a notice to the state based on the plea, which questions the validity of recent orders, circulars, and enforcement notices that aim to implement the 2024 Act’s provisions. The petitioners argue that the state lacks the authority to enforce the cess as the Act has not yet been formally enacted.
The petitioners further challenge the 2024 Act, its associated 2025 Rules, and the 2026 amendments, arguing against various notifications and orders from the State Labour Department. Representing the petitioners, Senior Advocate Uday Holla emphasized that the Act’s implementation is contingent on a notification in the Official Gazette, which has not occurred.
Legal Arguments Against the Cess
The petition highlights that although the Act received the Governor’s assent and was published on September 23, 2024, the lack of a commencement notification renders any enforcement premature. Notably, a March 10, 2026 notification appointed authorities under the Act, and an April 8 office order instructed officials to collect the cess, prompting enforcement notices to multiplexes.
On August 29, a directive was issued mandating cinema halls to add a 2% surcharge to ticket prices starting September 1, a move contested by the petitioners as lacking statutory backing. They assert that only Parliament has the authority to legislate on social security matters, as it has already enacted the Code on Social Security, 2020, covering the welfare of cine workers.
Constitutional and Financial Concerns
The petitioners argue that the state-imposed cess constitutes a tax rather than a welfare levy, failing constitutional tax requirements. They also question the fairness of taxing multiplexes, which do not directly employ cine workers. The additional burden of the cess, combined with GST, could threaten multiplexes’ financial viability.
In their plea, the petitioners request the court to annul the circulars and enforcement notices related to the cess. They also seek a court declaration that the 2024 Act is not in effect due to the absence of a commencement notification. Additionally, they request interim relief to suspend the cess collection until the court reaches a final decision.
Legal representation for the petitioners is provided by Khaitan & Co.
