Karnataka HC seeks state reply on multiplexes' challenge to 2% welfare cess

The Karnataka High Court on Wednesday directed the state government to respond to a petition challenging the imposition of a 2% welfare cess on cinema ticket revenue. The levy is being sought under the Karnataka Cine and Cultural Activists (Welfare) Act, 2024.

Justice H.T. Narendra Prasad issued the notice while hearing a plea filed by the Multiplex Association of India and PVR INOX Ltd. The petitioners contend that state authorities have begun issuing circulars and notices demanding collection of the cess with effect from September 1, despite the Act not yet being brought into force.

The Act received the Governor's assent on September 23, 2024, and was subsequently published in the official gazette. However, the petitioners point to Section 1(2) of the legislation, which stipulates that the Act will come into effect only on a date appointed by the state government through a formal gazette notification. No such commencement notification has been issued to date, they argue.

On the legality of the cess itself, the multiplexes claim the state legislature lacks the competence to impose it. They argue that Parliament's Code on Social Security, 2020 already occupies the field of social security for workers, including those in the cine industry. The petitioners further describe the 2% levy as a "tax" in substance that fails to meet constitutional requirements.

The petition also questions the reasonableness of imposing the cess on multiplexes, asserting that these establishments have no direct relationship with the cine and cultural workers the welfare measure is intended to benefit.

The court has adjourned further hearing to September 10.