Four days ago we wrote that Karnataka’s two percent cinema cess starts on 30 September, and that the High Court had already killed an earlier version of it once on a procedural point.
On Tuesday the exhibitors came back, and this time they are not arguing about procedure.
What Happened In Court
Per Bar and Bench, the Karnataka High Court heard an application on 29 September seeking a stay on enforcement of the cess. The bench is Justice H T Narendra Prasad, the same judge who quashed the state’s earlier collection orders on 11 September.
The court said it would consider the stay request on Wednesday, 30 September, and directed the State to respond, with the Advocate General to be given an opportunity to be heard.
Read that date again. The cess is due to start on 30 September. The court will decide whether to suspend it on 30 September.
The Argument Has Changed
This is the part that matters and the part that is being underreported.
The first challenge, the one that succeeded on 11 September, was narrow and technical. The state was collecting money under an Act it had never brought into force. The court agreed, the orders were quashed, the state gazetted the Act properly, and the problem went away.
The new petition is a constitutional challenge. Per Bar and Bench, the petitioners contend the levy is an unconstitutional tax dressed up as a cess, and that the State does not have the legislative competence to impose it.
That is a completely different kind of attack. A procedural defect can be fixed with a notification in an afternoon. A finding that the State lacked the power to levy it at all cannot be fixed by the State at all.
They are also seeking a declaration that the amended provisions are unconstitutional, and protection against recovery proceedings and penalties in the meantime.
Who Is Asking
The Multiplex Association of India and PVR INOX are back, which is expected. They led the first challenge and they have the most exposure.
The interesting addition is Vinayaka Chitramandira, alongside shareholder Prateek Chauhan.
Up to now this has been reported as a multiplex fight, and the Karnataka Film Chamber’s public position has been that two rupees on a hundred-rupee ticket is not worth the noise. A Karnataka exhibition name appearing on the petition complicates that framing considerably.
It is much harder to run the line that this is national chains protecting their margins when a local operator is standing next to them in the same case.
What We Said Four Days Ago, And What We Would Revise
We took the position that the cess should stand, that two rupees on a hundred is not what keeps anyone out of a cinema hall in Bengaluru, and that the industry bodies were fighting about the rate while asking nothing about how the fund would actually pay out.
We still think the second half of that is right. Nobody has published registration numbers, disbursement rules or accounts, and our reporting this week on what a Kannada film set actually pays found no published wage schedule either.
The first half needs qualifying. If the petitioners are right that the State lacks legislative competence, then whether the cess is a good idea stops being the question. A levy that the State cannot lawfully impose does not become lawful because the cause is sympathetic, and the workers it is meant for are the ones who lose if the whole thing is struck down in eight months rather than fixed now.
We are not in a position to say whether the constitutional argument is sound. That is what Wednesday is for.
The Three Outcomes
Stay granted. The cess does not start tomorrow. Exhibitors carry on as before, the constitutional question goes to a full hearing, and the welfare fund has no income until it is decided.
Stay refused. Collection begins on 30 September while the challenge proceeds. Exhibitors collect and remit under protest, and if the levy is later struck down the state is facing refund claims on every ticket sold in the interim.
Something in between. The court permits collection but restrains coercive recovery and penalties pending the outcome, which is the compromise courts reach for when neither side should be wiped out before the argument is heard.
Bengaluru Baath Take
Whatever happens on Wednesday, the state has made an avoidable mess of this.
The Act got assent a year ago, on 23 September 2024. The State then tried to collect through administrative circulars without commencing it, lost in court on 11 September, gazetted it in a hurry, and set a start date sixteen days later. The predictable consequence of a rushed notification is a fresh challenge, and here it is, on the eve of collection.
Book the hall, then sell the tickets. Not the other way round.
The people with the most at stake in this are still the ones nobody has consulted, quoted or counted. We will be at the result on Wednesday.
Sources
- Bar and Bench, hearing of 29 September, bench, petitioners, relief sought and next date
- Storyboard18, the 11 September judgment quashing the earlier cess orders
- Variety India, the Multiplex Association challenge
- Oneindia, the 30 September start date and industry positions
