New Delhi: The Punjab cabinet on Monday approved the imposition of additional entertainment tax by local bodies (municipal corporations, municipalities, panchayats, local and district councils) on direct-to-home (DTH) and local cable connections, outside the ambit of the goods and services tax (GST).
According to a statement released by the Punjab chief minister’s office, the local bodies will now be able to impose and collect entertainment tax of Rs5 per DTH connection and Rs2 per local cable connection per month “with the enactment of The Punjab Entertainments & Amusements Taxes (Levy & Collection by Local Bodies) Act 2017.”
However, no additional entertainment tax has been proposed for cinemas, multiplexes and amusement parks. The government has proposed to bring the new legislation in the next session of the legislative assembly and is expecting to generate Rs45-47 crore in annual revenue from the taxes with close to 1.6 million DTH and 4.4 million cable connections in the state.
“The nominal tax would ensure accountability on the part of cable operators. With the new tax structure in place, the government would be able to ask them to disclose details of their connections, which they have so far been prone to hiding in order to evade tax,” said local bodies minister Navjot Singh Sidhu in a statement.
Tax experts and media executives, however, believe that this additional local tax defies the purpose of GST and will lead to an increase, though nominal, in the prices of DTH and cable services. “This will again lead to more than one tax being imposed on the television services, which was the case before GST. Although, it is a small amount but it will be passed onto the customers. Plus, our compliance cost will go up,” said an executive at a cable distribution company who did not want to be named.
“This is a bad news for the industry. If Punjab is doing it, other states will also follow this regime,” the executive added.
Currently, the GST has been fixed at 18% on DTH and cable services by the finance ministry.
Utkarsh Sanghvi, tax partner at EY India, explained that there is a two-fold challenge with the levy of this local tax. “First of all, GST will be levied on the total value of the service i.e. original price plus entertainment tax. TV services are likely to get nominally expensive. Secondly, there is no point in levying this tax for the first five years, because state governments will be reimbursed for loss in tax revenue by the central government. Companies will now have to comply with two taxes” he said.