The Petitioner runs a cinema theatre in a partnership firm. Until, the introduction of GST, Puducherry Government collected Entertainment Tax from the theatre owners. Post the introduction of GST, the Petitioner charged GST @ 18% and 28% depending upon the ticket prices excluding 10% maintenance charges, allowed to be charged by the theatre owners. However, the petitioner was forced to pay entertainment tax at the rate of 25%. Thus, altogether the petitioner was compelled to pay 53% tax.
Challenging the imposition of entertainment tax, the Petitioner submitted that out of the total tax collected, the dispute herein was in respect of 25% of entertainment tax being collected by the Respondent. After introduction of GST, and when the Puducherry Municipalities Act, 1973, is subject to GST, the Respondent had no authority to collect the entertainment tax. The entertainment tax is imposed by the Municipality and not by the State. Section 173(2) of the CGST Act annulled the collection of the tax by the Municipality.
The Petitioner further relied upon Article 265 of the Constitution of India, to submit that no tax can be collected, without the authority of law. It was further submitted by the Petitioner that entertainment tax cannot be collected separately especially when the same is included under GST.
Upon perusal of Section 173 of the CGST Act, the Madras HC observed that the the Legislature have consciously retained the power of the Municipal Council to collect tax on all other subjects except the collection of tax on advertisements other than advertisements published in the newspapers. In other words, the Municipal Corporation has the powers to impose Entertainment tax even after GST was introduced. It was observed that Section 173(1)(a) is a specific provision stating powers of Municipal Corporation to impose tax under different heads. Accordingly, Section 173(2) cannot override a specific provision made under Section 173(1), and is a stand-alone provision.
The HC further observed that as Section 173(2) of the CGST Act states that collection of tax by such authorities shall stand annulled or rescinded or modified, the powers of Municipal Corporation are only modified and are neither totally annulled nor rescinded.
Basis the above observations, the Madras HC held that the collection of the entertainment tax by Municipality is within their power as Entry 62 of the State List of the Seventh Schedule of the Constitution of India. Accordingly, the Madras HC dismissed the Writ filed by the Petitioner.
Balaji Theatre vs. The Chief Secretary and Ors. [W.P.No.33077 of 2018]
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The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned hereinrra quis.
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