Kerala HC upholds the constitutional validity of levy of Service tax on admission and access to entertainment event & amusement facilities

This tax alert is prepared on a recent decision of Kerala High Court (‘HC’) [2016-TIOL-856-HC-KER-ST].
The issue before the HC was whether deletion of the entry “admission and access to entertainment event and amusement facilities” from the negative list of services and consequent imposition of service tax on such activity could be considered to result in the Union Parliament trenching upon the exclusive field assigned to the State (under Entry 62 List II of the seventh schedule of the Constitution of India).

Kerala HC held that:

The facility for the provider is not amusement, but it is a service offered for a fee. The carrying on of an amusement park is an activity undertaken for another, the admittance to which is regulated by fees. It partakes two distinct and different aspects. The power to tax their distinct aspects is with the Union Parliament and the State Legislature respectively.

There is no conflict between the two entries (Entry 97 of List I and Entry 62 of List II), which are fields of legislation. The two aspects taxed by the respective legislatures are the ‘service’ and the ‘amusement’.

The tax, imposed by the Union Parliament, in pith and substance, is on the service offered by the petitioners.

Accordingly, Kerala HC has upheld the constitutional validity of levy of Service tax on admission and access to entertainment event & amusement facilities.