Karnataka High Court quashes 2% cine welfare cess notices as Act awaits enforcement

The High Court of Karnataka on Thursday quashed the circulars and notices issued by regulatory authorities directing multiplexes and cinema theatres to collect a 2% welfare cess on tickets from September 1, after the State government conceded that the governing legislation had not yet been brought into force.

Justice H.T. Narendra Prasad passed the order while allowing a petition filed by the Multiplex Association of India and PVR INOX Ltd.

The notices had sought collection of the cess under the Karnataka Cine and Cultural Activists (Welfare) Act, 2024. The petitioners challenged the demands on the ground that the legislation had not been operationalised, as the government had not issued the gazette notification specifying the date from which the Act would take effect, despite the law having received the Governor's assent on September 23, 2024, and being published in the Gazette.

The government informed the court that the notices had been withdrawn on September 9, and acknowledged that the gazette notification announcing the commencement date was still pending.

Since the petitioners had also questioned the validity of the Act itself, the court observed that an examination of its legality would not arise at this stage because the law is yet to be enforced. It, however, reserved the petitioners' liberty to challenge the legislation as and when it comes into force.

The petitioners had further contended that the State legislature lacked the competence to impose the cess, arguing that Parliament had already enacted the Code on Social Security, 2020, which occupies the field relating to the social security of workers, including cine workers.