Karnataka High Court: Cineplex 2% Cess Stay on Ticket Revenue

• The Karnataka High Court has temporarily stayed coercive action against Cineplex Private Limited regarding a 2% cinema ticket cess.
• This directive is part of a legal challenge to the constitutional validity of the `Karnataka Cine and Cultural Activists (Welfare) Act, 2024`.
• The Act imposes a 2% cess on cinema ticket revenues specifically from multiplexes.
• Justice HT Narendra Prasad issued notices to state departments and ordered the case to be heard with similar petitions.
• The interim order provides a crucial, albeit temporary, reprieve for Cineplex Private Limited and signals potential broader implications for other multiplex operators in Karnataka.

The Karnataka High Court has issued an interim directive, preventing the State government from taking any coercive measures against Cineplex Private Limited concerning the mandatory 2% cess on cinema ticket revenues.

The Karnataka High Court has issued an interim directive, preventing the State government from taking any coercive measures against Cineplex Private Limited concerning the mandatory 2% cess on cinema ticket revenues. This significant order, delivered by Justice HT Narendra Prasad, provides temporary relief to the multiplex operator amidst its legal challenge to the state's new welfare legislation.

The court's decision came after Cineplex Private Limited filed a petition, specifically named `Cineplex Private Limited v. State of Karnataka & others`, contesting the constitutional validity of the `Karnataka Cine and Cultural Activists (Welfare) Act, 2024`. Justice Prasad also issued notices to key respondents, including the Karnataka Labour Department and the Karnataka Cine and Cultural Activists' Welfare Board, signaling the commencement of a thorough judicial review of the Act.

The core of the legal dispute revolves around the `Karnataka Cine and Cultural Activists (Welfare) Act, 2024`, which mandates a 2% cess on the revenues generated from cinema tickets sold by multiplexes. Advocate MG Naveen Kumar, representing Cineplex, highlighted to the court that the plea directly challenges this Act, arguing against its constitutional validity.

Further underscoring the immediate impact of the legislation, the petitioner's counsel informed the court that authorities had already begun issuing notices related to the collection of this cess. The High Court, acknowledging these submissions, explicitly directed the respondents to refrain from any coercive actions against Cineplex Private Limited until the next scheduled hearing, thereby providing crucial breathing room for the company.

This interim order from the Karnataka High Court carries significant implications beyond just Cineplex Private Limited, as the court has instructed that this matter be listed alongside other similar petitions. This suggests a coordinated judicial approach to the various challenges being mounted against the `Karnataka Cine and Cultural Activists (Welfare) Act, 2024` and its imposition of the 2% cinema ticket cess.

Indeed, in a related case presenting a similar challenge to the multiplex cess validity, the Additional Advocate General had previously given an undertaking that no coercive steps would be taken against those petitioners until their next hearing. This pattern indicates a broader legal scrutiny of the Act and the potential for a unified resolution for multiplex operators across Karnataka, including the Multiplex Association of India, which is also involved in similar challenges.

Lawyers advising cinema operators and multiplexes in Karnataka should inform clients that the Karnataka High Court has stayed coercive action regarding the 2% cinema ticket cess, providing temporary relief. Compliance officers should monitor this ongoing legal challenge to the Karnataka Cine and Cultural Activists (Welfare) Act, 2024, as the final outcome will determine future compliance obligations related to this cess.

Source: Original reporting via legal news outlet