The Delhi governments move to improve its entertainment tax collections by bringing Direct-to-Home (DTH) users under the tax net has hit a roadblock.

DTH service providers Tata Sky and Airtel have contested the governments decision to charge Rs 20 for each DTH connection as entertainment tax and have filed writ petitions in the Delhi High Court.

The Delhi Assembly had approved the amendment in Rule 4 of the Delhi Entertainment and Betting Tax Act bringing DTH users in the tax net last month.

Both companies have claimed they are already paying a licence fee to the Centre and need not pay an entertainment tax to the government. The matter will come up for hearing on April 22, an official from the Excise department said.

The decision was implemented on February 1 to add another Rs 80 lakh to Rs 1 crore to its entertainment tax collections of Rs 7 crore expected in the current financial year.

We are hoping to receive around Rs 30 lakh from Tata Sky as entertainment tax for the ongoing financial year, a Delhi government official said. Airtel has already paid Rs 13.22 lakh, but contested the move.

There are about six DTH operators functioning in the city and the government has already collected about Rs 29 lakh so far.

While the tax was earlier levied only on cable operators, officials in the department said the decision was also meant to map all DTH users in the city. Since the market has grown rapidly in the last few years, we arent even sure of the revenue that the tax will cough up, the official added.

VAT boosts collections
While the Delhi government has increased the Value Added Tax (VAT) charged on essential and luxury commodities, the introduction of VAT in the Capital has strengthened the state exchequer with the tax collections registering a 100 per cent increase in the last five years.

As per the latest official figure, the government has collected Rs 11,118.87 crore through VAT in the fiscal 2009-10 as against the total tax revenue of Rs 5,199.76 crore in 2004-05, which is inclusive of sales tax.