Today (July 30), the Supreme Court declared that entertainment tax cannot be imposed on internet services provided by cinema owners under the Tamil Nadu Entertainment Tax Act, 1939. The ruling comes after a detailed examination of the nature of online booking fees and their purpose.
Justice BV Nagarathna remarked that the additional charge for booking cinema tickets online from home is for the convenience of customers, saving them time, energy, and travel expenses. “The transaction allows you to save time and petrol by booking tickets from home, which is why an extra Rs 30 is charged,” the Court stated.
The bench, which also included Justice Nongmeikapam Kotiswar Singh, questioned the justification for subjecting this service to entertainment tax. They highlighted that services like gold class seats, which offer food and drinks, are also priced higher without being taxed similarly.
The Court dismissed a comparison made by the petitioner between online booking fees and optional charges at drive-in theaters, deeming it inappropriate. The Supreme Court upheld the Madras High Court’s decision, stating that the Tamil Nadu Entertainment Tax Act, 1939, does not provide for taxing internet services offered by cinema owners.
Previously, Justice BV Nagarathna had commented that the extra charge for online booking is not for entertainment but for the convenience of booking tickets without traveling to the cinema.
The High Court had reasoned that payments for services connected to entertainment are taxable only if mandatory for entry. Since online booking charges are optional and not a condition for entering a cinema, they should not be taxed. The High Court observed, “This is an additional payment for a facility provided by the cinema owner, not a mandatory fee.”
The Supreme Court agreed, emphasising that entertainment tax applies solely to the ticket cost, which grants entry to the cinema hall. “Under Section 3(7)(c) of the Act, a payment must be mandatory for attending entertainment. Online booking is optional and a separate convenience offered by the cinema owner’s web portal,” the Court concluded.
