Entertainment tax is inclusive of the tickets we buy to watch movies or large scale entertainment shows.

A few prominent features of entertainment tax are as follows-

• This tax is applicable for any form of entertainment all over the country and is a part of the different costs borne by customers
• The authorities responsible for collection of entertainment tax from customers are the State governments
• In the country, entertainment tax is different for different states as it falls under the purview of the state governments
• All the rules and guidelines that are applicable to the entertainment tax in India are listed in Article 246 of the Indian constitution
• Paid television services such as Tata Sky, Airtel TV, Dish TV etc. have led to even more taxes being levied on entertainment
• Entertainment tax is also applicable on the below mentioned categories of entertainment as well:
  • Exhibitions
  • Arcades
  • Celebrity Stage Shows
  • Theatre Shows
  • Video Games
  • Activities related to sports
  • Amusement Parks
• Launched during the time when British ruled the country, entertainment tax came into existence so as to curb public gatherings. However, the application of entertainment tax continued in the post-independence era as well and currently, still exists in all states of the country.

This table encapsulates the final tax rates that are applicable on entertainment post implementation of GST from the month of July in 2017-

Here’s an example with the help of movies, to understand the impact of GST on the end customer. In multiplexes or movie theatres, food and beverages are taxed at a VAT of 20.5% and tickets are taxed at an average of 30% tax. All of this is dependent on the state where the customer watches a movie.

GST on movie tickets is applicable at the rate of 28%. Food and beverages fall under the purview of food and drinks in outdoor catering, and hence attract 5 – 18%. Therefore, it is evident that the GST rates for the entertainment industry are lower than the VAT and Service Tax.

Overall, GST has multiple effects on the entertainment industry, and varies according to different states. For states where the entertainment tax was higher than others, GST has proved to be beneficial, as it reduces the prices for the end customers. However, GST has an inverse effect on states that already had a low entertainment tax.

According to the Luxury Tax Act, ‘Luxury’ means a service or Commodity that is specified as ministering comfort, enjoyment or pleasure to a persons life. Even though, a person may not like a particular hotel or accommodation as per Luxury Tax Act and State Luxury Tax Rate he/she has to pay the respective taxes involved.The Indian tax administration has had challenges dealing with the concept of luxury for a long time. The introduction of Goods and Services Tax (GST) by the government has put “luxury items” in the highest tax bracket at 28%. Luxury by definition is hard to explain, it is subjective in nature. One person’s luxury can often be another person’s necessity.

Luxury Taxes was under the purview of almost all State Luxury Acts. Taking the example of the State of Karnataka, the following are applicable under Luxury Tax.

• The services provided to the members of a club such as deposit, fee, donation or any other charges as mandated by the State
• The services provided by hotels for their residents
• Customers availing services at spas, beauty parlours, health club, swimming pool
• A hospital providing services more than Rs.1000 per day at 8% tax

• The tax on luxury goods and services can include but are not limited to only hotels, lodging houses, resorts or conference/ congregational halls. There are other clubs having facilities within them to provide lodging that can also attract luxury tax.Under the GST regime, The GST council has established different tax slabs for hotels and restaurants depending on their turnover and considering the criteria of airconditioned or non-airconditioned.This now implies that consumers would have to pay out more or less depending on the type of restaurant they are visiting i.e. with an air conditioner or non-airconditioner. The tax rates at restaurants in a 5-star or 7-star hotel will be considerably much higher at 28 per cent.Here is a list of Luxury Tax rates on hotels:

  Room Tariff per night (INR)	GST Applicable
  Lesser than INR 1000	0% (no tax)
  Greater than INR 1000 but lesser 2500	12%
  Greater than INR 2500 but lesser than 7500	18%
  Greater than INR 7500	28%

  Tax rates that hotels incur:

  • Restaurants with a turnover of less than Rs 50 lakh will be imposed a tax rate of 5 per cent.
  • Non-ac restaurants will have a tax imposition of 12%.
  • AC restaurants will incur 18% tax.
  • Five-star restaurants will have to impose a luxury tax of 28 per cent.
  • Hotels, lodges and clubs having tariffs rates less than Rs 1,000 will be taxed at 5%.
  • Hotel, lodges and clubs with tariffs between Rs 1,000- Rs 2,500 will be taxed at 12%
  • Hotel, lodges and clubs with tariffs between Rs 2,500- Rs 5,000 will be taxed at 18%.