Supreme Court holds that musical concerts in the state of Gujarat fall under the exemption provided under the Gujarat Entertainments Tax Act, 1977 [Read order]

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The Supreme Court on July 24, while hearing an appeal filed by Gypsy Pegasus Ltd concerning entertainment tax levied on a December 2016 musical concert, held that in the state of Gujarat all kinds of musical programmes are exempted from payment of entertainment tax, even if they are performed in a commercial manner and for profit making. The Supreme Court overruled the Gujarat High Court’s order which had imposed the requirement of the entertainment to be for educational, cultural or charitable purpose to be eligible for exemption. [Read order here]

Under the Gujarat Entertainment Tax Act, 1977, Section 3 of the Act is the charging Section. Section 3A of the Act which was brought in by an amendment in the year 1998 reads as follows:

3A. Certain entertainments free from tax. Notwithstanding anything contained in section 3, there shall not be levied and paid the tax to be State Government on any payment for admission to entertainments specified in the Schedule III.

Schedule III to the Act specifies the lists of entertainments that Section 3A of the Act takes out of the purview of the charging Section. The particular form of entertainment concerning this case was the first item in Schedule III to the Act, namely, “All kinds of musical programmes including musical nights and opera”.

Section 29 of the Act provides for exemption from payment of entertainment tax by issuance of notification in the Official Gazette and upon fulfilment of the conditions specified therein. One such condition for grant of exemption is that the entertainment must be provided for educational, medical, cultural, charitable, or such other purpose.

The Appellant had arranged a live musical concert in Sardar Patel Stadium in Ahmedabad on 23rd December, 2016. Entertainment tax on the gate receipts of the musical program was levied which was challenged by the Appellant before the Gujarat High Court. The High Court rejected the appellant’s claim primarily on the ground that the musical concert organized by the appellant was not for the purposes of promotion of cultural activities and was for commercial purposes.

In the appeal filed before the Supreme Court, the SC held as under:

“The matter lies within a short compass. Section 3 of the Act is the charging section whereas Section 3A of the Act makes certain forms of entertainments non-taxable. If a form of entertainment is not taxable under Section 3A of the Act we do not see how the requirement of exemption and necessity to conform to the requirement of exemption can apply to a non-taxable form of entertainment.

 We have read and considered the speech of the Hon’ble Finance Minister which had led to the amendment of the Act by incorporation of Section 3A and what we find therefrom is that all kinds of

musical programmes, without any qualification, have been sought to be taken out of the purview of the charging section. If that is so, we can find no substance in the arguments advanced on behalf of the State; neither can we agree with the reasoning of the High Court. The High Court could not have imposed the requirement of the entertainment to be for educational, cultural or charitable purpose when the form of entertainment in question is included in Schedule III to the Act. We, therefore, set aside the order of the High Court and allow this Appeal.”

The decision of the SC however would not have any effect post introduction of GST since entertainment tax is now subsumed under GST.