Karnataka High Court Seeks State's Response To Plea Challenging 2% Cinema Ticket Cess; Act Comes Into Force Tomorrow

The Karnataka High Court on Tuesday (September 29) sought the State's response to a petition challenging the constitutional validity of the 2% cess imposed on cinema tickets under the Karnataka Cine and Cultural Activists (Welfare) Act, 2024 and the Rules framed thereunder.

Justice H.T. Narendra Prasad was hearing a petition filed by Vinayaka Chitra Mandira Theatre challenging Sections 9(1), 9(2) and 11 of the Act, along with Rule 8(1) of the Karnataka Cine and Cultural Activists Social Security and Welfare Rules, 2025.

The petitioner has also challenged orders issued by the Labour Officer in August and, in the alternative, sought a declaration that cinema theatre owners have no liability to pay or remit the cess levied under Section 9 of the Act.

After briefly hearing senior counsel K.V. Dhananjay for the petitioner, the Court issued notice to the respondents.

The petitioner insisted on an interim stay, pointing out that the statute comes into force tomorrow (30.09.2026) by virtue of the Notification dated 10.09.2026 issued by the State Government. The State submitted that it may file its objections expeditiously.

The Court has now told that the matter will be taken up again tomorrow for the consideration of interim relief.

Earlier, on 10.09.2026, in Multiplex Association of India v. State of Karnataka, the coordinate bench of the court had quashed identical show cause notices and Order issued to multiplex operators, upon the State's own submission that the Act had not been brought into force through a notification under Section 1(2) of the 2024 Act.

On the same day, the State issued a the Notification published in the Karnataka Gazette Extraordinary, marking 30-09-2026 as the date on which all the provisions of the Act shall come into force.

Today, the counsel for the petitioners also submitted to the court that the Act fails on too many grounds to enumerate. Due to the absence of an assessment, determination or adjudication mechanism, it is prone to misuse and arbitrary action by the state, the counsel submitted.

The petitioner also illustrated another instance since the Hollywood films are faring well in the state as of now. The counsel pointed out that since cess is levied even on Hollywood films, if the Hollywood artists were to register under the impugned Act for welfare benefits so that the Board grants them welfare benefits, then the Board itself would be violating numerous provisions of Central Foreign Exchange Laws.

Context

The writ petition challenges the levy on several grounds. It points out that the Act's Statement of Objects & Reasons invokes Entries 23 & 24 of List III of the Seventh Schedule, which are social security and welfare of labour. However, both of them [social security and labour welfare] are non-taxing entries in the Concurrent List, and the concurrent list itself contains no taxing entry apart from Entry 47 (fees), the plea adds.

The petitioner contends that a cess is equivalent to a tax as held in various apex court precedents. Moreover, every tax must trace its source to a specific taxing entry, the plea contends.

The petitioner contends that the levy falls equally on Hollywood and Japanese animation films whose artists can never be beneficiaries, and the Fund serves six Academies wholly outside cinema.

“…. No provision of the Act sets the cess proceeds apart for the workers of cinema, still less for any class connected with exhibition. The beneficiary class is itself open-ended, extendable by executive notification to persons "engaged in such other activities as declared by the Government". And of the seven Academies enumerated in Section 2(a), six — the Nataka, Sangeetha-Nruthya, Janapada, Lalithakala, Yakshagana and Bayalata Academies — belong to fields wholly outside cinema. Money taken from cinema theatres would be spent on classes with no connection to a cinema theatre at all…”, the plea says further.

Since cinema theatre employees are neither artists nor production crew recognised by any academy under Section 2(e), no theatre employee can become a registered beneficiary under Rule 7 read with Section 2(f), it is noted in the petition.

“…Yet the levy is measured on every ticket the cinema theatre sells, though the cinema theatre employs not a single registered beneficiary…. On any construction of the Act, the employees of the paying cinema theatre receive nothing under it. An exaction without special benefit to the payer is a tax, not a fee”, the plea adds.

The petitioner also argues the Act contains no provision for assessment, no prescribed return form, no appeal against quantification, and no procedure between the levy in Section 9 and the recovery in Section 13.

Pertinently, the petitioner argues that the Act was supposed to come into force only on a date appointed by notification under Section 1(2). No such notification was issued until 10.09.2026, when the State appointed 30.09.2026 as the date of commencement.

On the other hand, the Rules under the Act were notified on 03.11.2025 before commencement. The impugned notices issued to the petitioners in August demanded remittance 'from the date on which the Act became applicable up to the present period' whereas the levy's application is yet to begin, it is argued.

Since the revenue from every ticket is divided among exhibitor, distributor and producer, the Act does not say which of the three is to bear the levy, the plea says further.

As an interim prayer, the petitioner has also sought a direction restraining the respondents from taking any coercive action including recovery under Section 13, penalty under Section 16, prosecution under Section 17, or action against the cinema licence under Condition No. 15 pending adjudication, along with stay on the notices issued

The petitioner, which is a licensed 731-seat single-screen in Marathahalli showing multi language films, points out that tickets are generally priced above Rs. 100 and bear GST at 18% (9% CGST & 9% SGST). On a typical Rs. 200 tickets, about Rs. 15 flows to the State Government as SGST. The impugned cess would take a further 2% of the fare about Rs. 3.40, outside the GST framework, arbitrarily.

Case Title: M/s Sri Vinayaka Chitramandira & Anr. v. State of Karnataka & Ors.

Case No: W.P. No. 30824 of 2026