Karnataka High Court quashes 2 per cent cess on cinema tickets

MUMBAI: The extra ticket charge has been shown the exit door. The Karnataka High Court has quashed State government orders seeking to impose a 2 per cent cess on cinema and multiplex tickets, holding that the law backing the levy had not yet been brought into force.

Justice HT Narendra Prasad passed the order on a petition filed by the Multiplex Association of India, PVR INOX and others challenging the State’s move to collect the additional levy.

The dispute centres on the Karnataka Cine and Cultural Activities (Welfare) Act, 2024, which seeks to establish a social security and welfare framework for cine and cultural workers. Under Section 1(2), the Act is to come into force only from a date appointed by the State government through a notification in the Official Gazette.

That notification had not been issued.

Despite this, the State government’s August 29 circular directed cinema theatres and multiplexes to collect an additional 2 per cent on ticket prices from September 1. The operators argued that administrative circulars and office orders could not substitute for the statutory requirement needed to bring the parent legislation into force.

Senior Advocate Uday Holla, appearing for the Multiplex Association of India, questioned how the State could demand payment under legislation that was yet to become operational.

During the proceedings, the State informed the court that the Labour Department had withdrawn the office order directing collection of the cess. It also confirmed that the 2024 Act had not been notified in the Official Gazette as having come into force.

The High Court subsequently quashed the impugned office order and notification that sought to enforce the 2 per cent levy.

The ruling came a day after the court had sought the State government’s response to the challenge. On September 9, the court had questioned how Karnataka could demand payment under an Act that had not yet been brought into force.

The 2024 legislation provides for a Welfare Board and Welfare Fund for cine and cultural activists and envisages a welfare cess on cinema tickets and revenues from certain related establishments. Its proposed scope extends beyond cinema halls to areas including subscription fees, television channels and over-the-top platforms.

The petition before the High Court, however, went beyond the August 29 circular. The multiplex operators also challenged the 2024 Act, the Karnataka Cine and Cultural Activists Social Security and Welfare Rules, 2025, the 2026 amendment to the Act and various Labour Department notifications, office orders and enforcement notices.

Among their arguments was that the State framework could conflict with the central Code on Social Security, 2020, which covers social security and welfare measures for workers, including cine and cultural workers.

The operators also argued that the 2 per cent levy was effectively a tax and questioned the additional burden on an industry already subject to GST. They further challenged the basis for imposing the cess on multiplexes that may not directly employ the workers intended to benefit from the welfare fund.

For Karnataka’s cinema operators and audiences, the immediate effect is straightforward: the 2 per cent cess cannot be collected under the orders and notification quashed by the High Court.

The ruling does not, however, strike down the 2024 Act itself. The immediate question before the court was whether the State could enforce the levy without first formally bringing the legislation into force through the required commencement notification.

Any future implementation of the Act and its proposed welfare cess will therefore have to follow the statutory process laid down under the legislation.