Levy of Service Tax on Access to Amusement Facilities Held to Encroach Upon State’s Exclusive Taxing Power Under Entry 62, List II
Meetu Kumari | Dec 27, 2025 |
Kerala High Court Quashes Service Tax on Amusement Parks as Unconstitutional
The appellant, M/s Vengad Resorts & Retreats Limited, a public limited company operating an amusement park in Kerala, challenged the levy of service tax on “admission to entertainment events or access to amusement facilities” under the Finance Act, 1994. The appellant contended that the very same activity was already subjected to entertainment tax under the Kerala Local Authorities Entertainments Tax Act, 1961, enacted under Entry 62 of List II of the Seventh Schedule.
Until 01.06.2015, such services were excluded from service tax by virtue of Section 66D(j) of the Finance Act, 1994. After its omission by the Finance Act, 2015, the Union sought to levy service tax on access to amusement facilities. The appellant challenged the levy as unconstitutional, arguing that Parliament had encroached upon the State’s exclusive taxing power. The writ petition was dismissed by the single judge applying the aspect theory, leading to the present appeal.
Main Issue: Whether the Union could levy service tax on access to amusement facilities already taxed as entertainment under State law, without violating Entry 62 of List II.
HC Held: The Hon’ble High Court allowed the writ appeal and set aside the single judge’s judgment. It held that the State law imposed a comprehensive entertainment tax covering both admission and the amusement itself. Once the entire consideration was taxed under Entry 62 of List II, no separate taxable aspect remained for the Union to invoke its residuary power under Entry 97 of List I.
The Court found that both levies operated on the same aspect of entertainment/amusement, rendering the aspect theory inapplicable. Relying on Constitution Bench decisions in Kesoram Industries Ltd. and Godfrey Phillips India Ltd., the Court concluded that the impugned service tax was unconstitutional.
Thus, the levy of service tax on access to amusement facilities was struck down as trenching upon the State’s exclusive legislative competence under Entry 62 of List II.
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