Supreme Court upholds  Constitutional Validity of Kerala Luxury Tax on Cable TV, rules against Asianet Satellite Communication Ltd [Read Judgement]

In a  ruling against Asianet Satellite Communications Ltd. And Ors, the Supreme Court  upheld the constitutional validity of the Kerala luxury tax and affirmed the state's power to tax cable TV services under Entry 62 of List II (State List) as “luxury.”

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The case addresses whether Kerala's implementation of a luxury tax on cable TV services under the modified Kerala Tax on Luxuries Act, 2006, is constitutional. Major cable operator Respondent-Asianet contested the tax on two grounds: first, that cable services are not a "luxury" according to constitutional interpretation; second, that the tax was unfair because DTH providers were not subject to the same tax.

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At first, the Kerala High Court maintained the fee; however, subsequent changes exempted smaller operators (those with fewer than 7,500 connections) and ultimately all operators. These exemptions were eventually overturned by the High Court, which ruled that they violated Article 14 because they were arbitrary and that the tax discriminated against cable TV operators in comparison to DTH providers.

It was observed that different aspects of a composite activity, such as broadcasting and the provision of entertainment, can be taxed by different levels of government without infringing upon each other's legislative competence.

While allowing the appeal of Kerala State govt, the two judge bench of Justices BV Nagarathna and N Kotiswar Singh held that the findings of the Kerala High Court regarding arbitrary exemptions had been correctly decided earlier and that the revised legislative framework by the State of Kerala was now constitutionally valid because of the State's power to levy a luxury tax on the cable TV service.

The bench explained that there is no constitutional overlap between central and state levies because the service tax levied by the Finance Act on broadcasting services under Entry 97 of List I (Union List) does not clash with state entertainment taxes.

To Read the full text of the Order CLICK HERE

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