A recent Supreme Court ruling allowing both central and state governments to impose separate taxes on direct-to-home and cable TV services has rattled India’s broadcast sector, already reeling from shrinking margins and digital disruption.
While the judgment technically applies to the pre-GST (goods and services tax) era, its implications are far-reaching. Broadcasters now face a potential wave of retrospective tax demands, and the verdict may set a precedent for state-level levies on digital streaming, gaming, and other online content platforms—currently outside such frameworks.
Industry insiders warn this could drive up compliance costs, hurt profitability, and accelerate market consolidation.
“The dual financial burden could affect the profitability and sustainability of broadcasting operations, particularly for indigenous players operating on thinner margins. Coupled with revenue constraints, broadcasters will pass this increased liability down the value chain to consumers,” an tax expert said.
The legal uncertainty and litigation risk arising from such dual taxation may also disincentivize investment and innovation in the broadcasting sector, impeding its strategic evolution, he added.
The judgment, delivered on 23 May, stated that since broadcasting is a taxable service under the Finance Act, 1994, Parliament has the power to impose service tax, while state legislatures are equally competent to levy entertainment tax on those providing the service.
Another tax expert said that broadcasters had typically paid service tax on their revenues, and the dispute was with respect to the levy of entertainment tax by the states on the same revenue.
Since the Supreme Court has upheld the validity of levy of entertainment tax charged by the state governments, in the cases, where the demands of entertainment tax had been raised on the broadcasters, they will now have to also pay the same, he said.
However, under the GST regime, from 1 July 2017, entertainment tax levied by the state governments as well as service tax levied by the Centre were subsumed under GST.
That said, for the past period, it would be difficult for broadcasters to be able to collect the entertainment tax, and they may need to bear the impact of past demands, according to him.
The timing is especially challenging. Traditional broadcasters are already navigating multiple headwinds – rising content costs, declining advertising revenues, and intense competition from OTT platforms. The added cost burden could shrink access to premium content for price-sensitive viewers and reduce investment in regional or vernacular programming.
“With compliance now required under two regimes, increased operational costs are likely. Broadcasters, working under tight margins in a highly competitive environment, may inevitably transfer this burden to end consumers through higher subscription fees or reduced service quality,” he said.
“Over time, consumers may see fewer choices and less regional or vernacular content — a cost not captured in monetary terms but critical for cultural inclusion,” he added.
The decision also threatens to raise the bar for market entry, especially for smaller startups and content creators who lack the compliance muscle of larger incumbents.
A senior broadcast industry executive emphasized that local players already face stiff competition from global streaming giants with deeper pockets and efficient tax planning mechanisms. “The imposition of concurrent state entertainment taxes risks widening this gap by escalating operating costs for domestic players, possibly leading to market consolidation and reduced consumer choice,” the executive added.
The bigger worry, though, is what this means for digital platforms.
“The court emphasized that entertainment delivered digitally qualifies as a ‘luxury’, which opens the door for states to now explore levying entertainment taxes on digital content consumption, in addition to the existing GST,” he said.
Such a shift would further fragment India’s tax environment, raise compliance costs for tech platforms, and risk pushing subscription costs higher—mirroring the pressure now faced by broadcasters, he said.
Senior broadcast executives said industry bodies are still deliberating a collective response, and that discussions are ongoing. The potential liability will vary by broadcaster, depending on their market share and geographic reach.
