Supreme Court Upholds Dual Tax on DTH Services: Airtel’s ₹585 Crore Bill Stays On Air

Image Source: ET Telecom

The Supreme Court has rejected Bharti Telemedia's appeal against entertainment tax on Direct-to-Home (DTH) services, reiterating that both service tax and entertainment (luxury) tax can be applied together to broadcasters and DTH operators. Bharti Airtel Ltd has assured that its estimated exposure of ₹585 crore (₹5.85 billion) here is fully provisioned.

Supreme Court Verdict

The Supreme Court rejected the appeals of Bharti Telemedia and other DTH players, affirming the constitutional validity of charging both service tax and entertainment tax on DTH services.
The Court made it clear that broadcasting is a service (subject to service tax by Parliament) and entertainment provided through DTH is a luxury (subject to entertainment tax by states).
The judgment puts to rest that such taxes aim at different facets of the same activity and could be imposed without duplication.

Effect on Bharti Airtel

Bharti Airtel Ltd disclosed an estimated exposure of ₹585 crore (₹5.85 billion) arising from this tax matter, which is already completely provisioned in its books.
The financial health of the company is not likely to be negatively impacted, since the provisioning has been done.

Industry-Wide Implications

The ruling holds good for all DTH and cable TV players, not only Bharti Airtel, establishing that both the taxes are industry-wide.
The decision brings to an end years of court battles, establishing regulatory clarity and certainty for the industry.

Highlights of the Supreme Court Ruling

The Court noted that the process of broadcasting (transmission of signals) and facilitating decryption of content through set-top boxes are two different taxable events—one as a service, and the other as entertainment.

The ruling also settled appeals from several states and operators, such as Tata Play, and made it clear that earlier High Court rulings overturning entertainment tax were mistaken.

Relevant Sources: The Print, Exchange4Media, Verdictum