ON MAY 22, 2025, THE SUPREME COURT OF INDIA gave an important decision about whether both the Centre and the States can tax television broadcasting used for entertainment. The case raised the question of ‘dual taxation’—whether two different taxes on the same activity are allowed under the Constitution.
The bench of Justices B.V. Nagarathna and N. Kotiswar Singh held that both the Centre and the States can tax different parts of the same activity without breaking the law. The Court explained that the Centre can impose a service tax on the act of broadcasting (like providing channels and content), because it is a type of service. The State can impose an entertainment tax on the enjoyment of that broadcast (like watching shows at home), because it is a form of entertainment or luxury. The Court clarified that this is not illegal double taxation because the two taxes apply to different aspects of the same activity. Broadcasting and entertainment are treated as separate subjects in the Constitution and can be taxed by different governments.
This judgment carries significant constitutional and fiscal implications. It resolves long-standing ambiguity over whether such simultaneous taxation amounts to legislative overreach or violates the principle of double taxation. Additionally, the Court’s liberal interpretation of "entertainment" reflects the evolving nature of digital consumption in private and personalised spaces, extending the scope of entertainment tax beyond traditional forms.
The aim of this article is to critically examine the Supreme Court's ruling on the bifurcated taxation of broadcasting for entertainment purposes. It seeks to clarify the constitutional framework that permits both the Centre and the States to levy taxes on different facets of the same activity and analyze the reasoning adopted by the Court in interpreting Entries 62 and 97 of the Seventh Schedule. Lastly this article will evaluate the implications of this judgment on the broader issues of federal taxation powers and technological advancements in media consumption.
Understanding the constitutional framework behind dual taxation
India follows a federal structure, where both the Centre and the States have separate powers to make laws and levy taxes. These powers are listed in the Seventh Schedule of the Constitution, which divides subjects into the Union list – for the Centre, the State list – for the States and the Concurrent list – for both. In this case, the Centre and the State were both imposing taxes on the television broadcasting and viewing process, raising concerns about whether this was a case of double taxation. The Supreme Court carefully examined two specific entries from the Constitution:
Entry 97 of the Union List – This allows the Parliament (Centre) to make laws on any subject not listed in the State lList or Concurrent list, including imposing taxes on services. Broadcasting falls under this as a "service".
Entry 62 of the State List – This allows the States to tax "luxuries, including entertainment." Watching TV for fun at home or on a phone is a form of entertainment, and so, the State can impose entertainment tax.
The Court said that just because both taxes are related to broadcasting does not mean they are the same. They are taxing different aspects: The Centre taxes the service of broadcasting and the State taxes the consumption or enjoyment of entertainment. This is called the "aspect theory", where the same transaction can be viewed from different legal angles and taxed separately.
The Supreme Court’s reasoning: No overlap, just two aspects
In its judgment, the Supreme Court carefully explained why there is no conflict or overlap between the two taxes.
Justice Nagarathna, who authored the judgment, stated that two different laws can tax different parts (aspects) of the same activity, and this is perfectly valid under the Constitution. This idea is known as the “aspect theory”, a well-settled principle in tax law. It means that a single transaction or activity can be split into different legal parts, each of which can be taxed separately.
Aspects theory was first clearly recognised in the case of Federation of Hotel & Restaurant Association of India v. Union of India (1989) where the Court upheld the validity of a service tax imposed by the Centre on hotel services, even though States had the power to tax luxuries. The Court observed that a single transaction may involve multiple aspects, each amenable to a different tax by different authorities. Thus, aspects, not the entire activity, are taxed.
Another leading case is State of West Bengal v. Kesoram Industries Ltd. (2004) where a Constitution Bench clarified that two taxes may apply to the same subject matter, so long as they are levied on different aspects. The Bench explained that what matters is the true nature and character of the tax, not merely its label.
Applying these precedents to the issue, the broadcasting of TV channels is a technical service that involves transmission of content—this is what the Centre taxes under the Finance Act, 1994 as service tax.
The viewing or enjoyment of entertainment content by the subscriber, like watching TV shows or movies, is what the State taxes as entertainment tax, since it falls under Entry 62 of the State List.
Therefore, the judgment is not just a reaffirmation of established principles from cases like Federation of Hotel and Kesoram Industries but also a progressive application of those doctrines to the evolving landscape of digital broadcasting and entertainment.
The Court made it clear that “there is no overlapping in fact or in law… Different aspects of the same activity are being taxed under two different legislations by two different legislatures.”
This reasoning avoids the problem of double taxation, where the same part of a transaction is taxed twice by different authorities. Instead, the Court said that each government is taxing a different component, which is constitutionally allowed.
Broadening the scope of ‘entertainment’ in the digital age
One of the most important parts of the Supreme Court's judgment is its forward-looking interpretation of what qualifies as “entertainment.” Traditionally, entertainment was limited to public spaces like cinema halls, theatres, fairs, or amusement parks. These were places where people went out to be entertained—and therefore, they were taxed as such.
However, with the advancement of technology, the way people consume entertainment has changed dramatically. Today, entertainment is not just limited to public spaces—it happens everywhere, especially in private spaces like homes, and through personal devices such as: Televisions, Smartphones, Smartwatches, Tablets, Laptops and desktops, OTT platforms (like Netflix, Hotstar, etc.)
Recognising this shift, the Supreme Court stressed that the term “entertainment” must be understood in a broad, liberal, and modern way. The Court held that just because entertainment is consumed in private, like at home or on a phone, doesn’t mean it is beyond the scope of taxation.
What is ‘entertainment’?
While the Constitution does not define "entertainment," it is listed under Entry 62 of the State List as a form of luxury that States can tax. In the case of State of Andhra Pradesh v. N.T.P.C. Ltd (2002), the Court reinforced that entries in the list may be interpreted in a dynamic and expansive way, not restricted to traditional modes but to be made in contemporary with evolving nature.
Based on judicial interpretations, entertainment generally means any activity or content that provides amusement, enjoyment, or leisure to people. This includes watching a movie, a comedy show, a sports match, or even listening to music.
Why a Broad Interpretation Matters
The Court explained that in today’s digital world, the medium has changed, but the purpose remains the same—to entertain. Whether someone watches a movie in a cinema or on their phone while sitting at home, the activity is still one of entertainment.
By taking a broad view, the Court ensured that States do not lose their power to tax entertainment just because the form of delivery has changed. It also provided clarity for future taxation, especially as new technologies like augmented reality (AR), virtual reality (VR), and wearable devices continue to evolve.
This interpretation also aligns with the earlier principle laid down in Kesoram Industries , where the Supreme Court emphasised that constitutional entries should be interpreted in a flexible manner to adapt to social and technological changes.
Implications of the judgment
The Supreme Court’s decision is not just about legal principles—it has real-world consequences for governments, businesses, and consumers.
The judgment confirms that both the Centre and the States can tax different parts of the broadcasting process, without interfering with each other. This brings clarity to the legal framework and helps prevent future disputes between different levels of government about who can tax what.
Companies that provide TV or digital entertainment services—like broadcasters, OTT platforms, or cable operators—will now have to comply with both kinds of taxes. Service tax (or its replacement, like GST) to the Centre and Entertainment tax to the State government.
This could increase compliance costs and paperwork for these businesses. But the upside is that the legal position is now clear, so businesses can plan and operate with more certainty.
Since companies must pay two types of tax, they might pass on the added cost to consumers—for example, through higher subscription fees or service charges. While this might seem like a burden, the Court has clarified that this is not double taxation, but legally distinct taxes on different aspects of the service.
This ruling also strengthens some important constitutional principles like Aspect Theory: The judgment is a textbook example of how courts can allow different governments to tax different aspects of a single activity without conflict.
The Court recognised that in today’s world, entertainment no longer happens only in theatres or stadiums. It now includes streaming movies on your phone or watching TV at home. This helps tax laws keep up with new technologies and business models.
The Supreme Court’s ruling brings much-needed clarity to how broadcasting services and entertainment content are taxed in India. By upholding the constitutional validity of dual taxation under the aspect theory, the Court has struck a balance between the Centre’s power to tax services and the State’s power to tax entertainment.
It also broadened the meaning of “entertainment” to reflect modern technology and digital consumption habits. Overall, the judgment ensures legal certainty, respects federal principles, and aligns tax interpretation with present-day realities—fulfilling the aim of clarifying a complex area of law.
