The Karnataka High Court has issued notice on a single-screen theatre’s petition challenging the constitutional validity of the 2% cess on cinema tickets under the Karnataka Cine and Cultural Activists (Welfare) Act, 2024, and will consider interim relief on September 30, the day the Act comes into force.
Bengaluru: The Karnataka High Court on Tuesday issued notice to the State on a petition challenging the constitutional validity of the 2% cess on cinema tickets under the Karnataka Cine and Cultural Activists (Welfare) Act, 2024 and the Rules framed under it, and said it will consider the theatre’s plea for an interim stay on Wednesday, September 30, 2026, the day the Act comes into force [M/s Sri Vinayaka Chitramandira and Another v. State of Karnataka and Others].
Justice H.T. Narendra Prasad heard Senior Advocate K.V. Dhananjay briefly for the petitioner in W.P. No. 30824 of 2026 and issued notice to the respondents. The petitioner pressed for an interim stay, pointing out that the Act comes into force on September 30, 2026 under a State notification of September 10, 2026. The State told the Court that it may file its objections expeditiously. The contentions summarised below are those of the petitioner, and the State’s case has not yet been placed before the Court.
What is challenged
The petition challenges Sections 9(1), 9(2) and 11 of the 2024 Act and Rule 8(1) of the Karnataka Cine and Cultural Activists Social Security and Welfare Rules, 2025. It also challenges orders issued by the Labour Officer in August and, in the alternative, seeks a declaration that cinema theatre owners have no liability to pay or remit the cess under Section 9. As interim relief, it seeks a direction restraining coercive action, including recovery under Section 13, penalty under Section 16, prosecution under Section 17 and action against the cinema licence, along with a stay of the notices.
Background of the case
On September 10, 2026, in Multiplex Association of India v. State of Karnataka, a coordinate Bench quashed identical show cause notices and an order issued to multiplex operators, on the State’s own submission that the Act had not been brought into force through a notification under Section 1(2) of the Act. On the same day, the State issued a notification in the Karnataka Gazette Extraordinary appointing September 30, 2026 as the date on which all provisions of the Act come into force.
The petitioner says the Act was to come into force only on a date appointed by notification, that no notification was issued until September 10, 2026, and that its August notices demanded remittance from the date the Act “became applicable” up to the present, although the levy was yet to begin. It adds that the Rules were notified on November 3, 2025, before the Act commenced.
The petitioner’s grounds
The petitioner argues that the Act’s Statement of Objects and Reasons rests on Entries 23 and 24 of List III of the Seventh Schedule, which deal with social security and labour welfare, and that both are non-taxing entries in the Concurrent List, which contains no taxing entry other than Entry 47 on fees. It contends that a cess is equivalent to a tax, and that every tax must trace its source to a specific taxing entry.
It also says the levy is a tax and not a fee, because it gives the payer no special benefit. It says no provision of the Act sets the cess proceeds apart for cinema workers, and the beneficiary class can be extended by executive notification. Of the seven Academies listed in Section 2(a), six, namely the Nataka, Sangeetha-Nruthya, Janapada, Lalithakala, Yakshagana and Bayalata Academies, are in fields wholly outside cinema, so that money taken from theatres would be spent on classes with no connection to a theatre. Since theatre employees are neither artists nor production crew recognised by an academy under Section 2(e), it says, no theatre employee can be a registered beneficiary under Rule 7 read with Section 2(f), although the levy is measured on every ticket sold.
Procedural objections
The petitioner further argues that the Act has no provision for assessment, no prescribed return form, no appeal against quantification and no procedure between the levy in Section 9 and recovery in Section 13, so that it is prone to misuse and arbitrary action. It says the Act does not state whether the exhibitor, distributor or producer, who divide the revenue from each ticket, is to bear the levy. Counsel also submitted that the cess applies even to Hollywood films, and that if Hollywood artists were to register under the Act for welfare benefits, the Board granting the benefits could itself violate central foreign exchange laws.
The petitioner’s theatre
The petitioner is a licensed 731-seat single-screen theatre in Marathahalli that shows multi-language films. It says its tickets are generally priced above Rs 100 and carry GST at 18%, and that on a typical Rs 200 ticket about Rs 15 goes to the State as SGST. The 2% cess, it says, would take about Rs 3.40 more, outside the GST framework.
What happens next
The Court will take up the matter again on September 30, 2026 for consideration of interim relief. The State has yet to file its objections, and the Court has not decided the constitutional questions or granted or refused any interim relief.
Why it matters
The Act’s commencement on September 30 follows a ruling that the earlier enforcement steps were invalid because the Act had not been notified. This petition goes to the validity of the levy itself, on the ground of legislative competence and the nature of the cess, and interim relief on September 30 will decide whether theatres have to collect it while the challenge is pending.
Case Title: M/s Sri Vinayaka Chitramandira and Another v. State of Karnataka and Others [W.P. No. 30824 of 2026]
Bench: Justice H.T. Narendra Prasad, Karnataka High Court
Date of Hearing: September 29, 2026
Appearances: Senior Advocate K.V. Dhananjay appeared for the petitioners.