Filing Taxes – Semantic Taxgen Pvt Ltd
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Filing Taxes

Entertainment & Luxury Tax

Step 1

We will set up a seamless process for data collection.

Step 2

Your return will be prepared as required.

Step 3

Before you know it, your return will be ready for filing.

About Entertainment & Luxury Tax

One essential feature of the governance model of any country is taxation. Different kinds of taxes are applicable to services and goods, bought and sold by people as well as enterprises. Income earned by individuals and business houses also attracts tax in India. By definition, entertainment tax is a type of tax that is levied by the government on entertainment aspects like movie tickets, large scale commercial shows, and other private festival celebrations. With the implementation of the Goods and Services Tax (GST), the entertainment tax is no longer applicable.

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.

Entertainment tax is considered to be under the purview of the state governments in India, and hence, different states of the country have different entertainment tax rates applicable. The table below summarises the prominent entertainment tax rates in different states of the country.

Uttar Pradesh 60%
Bihar 50%
Maharashtra 45%
Karnataka 30%
Kerala 30%
West Bengal 30%
Haryana 30%
Orissa 25%
Delhi 20%
MP 20%
Gujarat 20%
Andhra Pradesh 20%
Assam 15% for tickets that cost less than Rs.20 and 20% for tickets that cost anything above Rs.20
Tamil Nadu 15% (All Tamil films are tax-free in the state)
Jharkhand 10%
Rajasthan 0%
Jammu & Kashmir 0%
Himachal Pradesh 0%
Punjab 0%

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

Indian Classical dance inclusive of folk dance
Movie festivals
Amusement Parks
Sport events such as IPL

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%.

Frequently Asked Questions

What is the entertainment tax?

Entertainment tax is a kind of tax which is levied by the government on entertainment aspects like movie tickets, large scale commercial shows and other private festival celebrations.

Is entertainment tax a direct tax?

No, entertainment tax is an indirect tax. Some other types of indirect taxes are excise duty, service tax, VAT, custom duty etc.

What is entry tax in India?

Entry Tax is the tax levied on movement of goods from one state to another. This tax is imposed by the state governments and is levied by the recipient state to protect its tax base.

What is the maximum deduction for meals and entertainment?

In most situations, you can only deduct 50% of entertainment expenses. However, you are allowed to deduct 50% of the meals, in case they are for entertainment purposes, but not if they already have been deducted for business travel.

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