Going to the theatre to watch the latest movie or to the stadium to cheer for your favourite cricket team seems like a good weekend plan. However, did you know you must also pay entertainment taxes on these tickets? This compulsory tax liability is payable over and above the ticket’s asking price.

Wondering if an entertainment tax is direct or indirect? How is it collected? How much do you have to pay? Keep reading to find the answers to these questions.

What is Entertainment Tax?

Entertainment tax is an indirect tax applicable to all commercial entertainment activities like film and music festivals, classical shows, cricket matches, etc. The government imposes this tax to collect revenue from such activities, which is used for the entertainment sector's general development.

Salient Features of Entertainment Tax

Entertainment tax in India has a colonial legacy since the concept was introduced during British Rule to limit public gatherings. In post-independent India, entertainment tax has been subsumed in the Indian constitution. Article 246 outlines the provisions for entertainment tax administration and collection.

Here are some of the prominent features of the tax:

• The Indian state governments are responsible for levying and collecting entertainment tax.
• This type of indirect tax is levied on various forms of entertainment and gets added to the final ticket prices to be covered by customers.
• Since it came under the state government’s jurisdiction, the rates in the pre-GST era varied.
• Under GST, paid television entertainment services like DTH and cable attract an 18% entertainment tax.
• Entertainment tax in India is applicable on:

*Exhibitions
*Celebrity stage shows
*Theatre shows
*Arcades
*Sports events
*Amusement parks
*Casino
*Race

• The state government might issue certain exemptions under the tax for cultural events like ones organised by charitable institutions or for children's education.
• The Indian government also offers an entertainment tax allowance for public sector employees. Under Section 16 (ii), the entertainment tax allowance in income tax provision states that government employees can claim the lowest of the following as a deduction:

*20% of their basic salary
*Rs. 5,000
*Actual entertainment allowance amount received during the fiscal year.  

Debunking Entertainment Tax Rates under GST

As mentioned earlier, before GST was introduced, entertainment tax in India varied from state to state. Tax rates ranged from 0%-110% depending on the concerned state’s tax policies. Here’s a list of the applicable entertainment tax rates in some of the Indian states:

These high taxation rates made entertainment activities unaffordable to most of the Indian population. However, this has changed with GST subsuming entertainment tax within its purview. Now, the following uniform tax rates apply to various entertainment sources:

*Note: Some Indian states charge additional taxes over and above this set GST rate.  

Conclusion

The impact of GST on the entertainment sector has been far-reaching. For the end-customer or movie-goers in states like Jharkhand, where the prior taxation rate was high, GST has helped. However, the GST replacing entertainment tax in states like Punjab has made entertainment costlier.

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Frequently Asked Questions

1. What is entertainment tax, for example?

An entertainment tax is a tax that’s imposed on commercial entertainment events by the state government. For instance, you have to pay an entertainment tax (28% under GST) when booking movie tickets.

2. What is entertainment tax in income tax?

Entertainment tax allowance is a deduction government employees can claim while filing their yearly taxes. As per Section 16 (ii), government employees can claim the lowest of the following as a tax deduction under the category:

• 20% of their basic salary
• Rs. 5,000
• Actual entertainment tax amount paid during the fiscal year

3. What type of tax is entertainment tax?

Entertainment tax is an indirect tax applicable to various entertainment services. This tax is levied and collected by state governments in India.

4. Is entertainment tax a direct tax?

No, an entertainment tax is not a direct tax. It is a form of indirect tax where the tax liability is passed on to the end customer. So, the tax amount gets added to the final ticket prices payable by the customer