Karnataka Assembly Passes Bill To Levy 2% Cess On OTT Subscriptions, Rules To Be Out Soon

The Karnataka assembly has passed a bill that proposes imposing a cess of up to 2% on OTT subscription plans. But questions remain over its implementation.

“The Karnataka Cinema and Cultural Workers Welfare Bill – 2024 was introduced in the Assembly today… The bill was unanimously passed in the assembly,” state labour minister Santosh Lad said in a post on X earlier this week.

Meanwhile, state labour department officials told Moneycontrol that they have commenced preparations for drafting rules for the same.

“We have already started preparations for the rules. The draft rules will be published in the public domain. We are also planning to conduct a stakeholder meeting on the cess collection,” one of the officials reportedly said.

The official refused to offer any details on how the cess would be levied on OTT streaming platforms but said, “We have some framework in mind. We are still working on the modalities.”

The bill is now pending before the Governor for further approval.

The bill proposes a “cine and cultural activists welfare cess” that will be imposed on movie tickets as well as OTT subscription fees in the state. The charges will range between 1% to 2% and will be revised every three years.

The bill also envisages the creation of ‘The Karnataka Cine and Cultural Activists Social Security and Welfare Fund’ to benefit cine artists in the state.

However, implementing charges on OTT subscriptions wouldn’t be easy as platforms such as JioCinema, Netflix, Amazon Prime have multiple pricing slabs for their customers.

While the modalities are yet to be decided, the additional cess is expected to increase the costs for streaming platforms, which may eventually pass the price hike to the end customers. This may not bode well for many of these players as most of them operate on thin margins.

It may also create an additional compliance burden for OTT platforms. However, this is not the first time that streaming platforms have landed in a regulatory soup with authorities.

The Centre’s Broadcasting Services (Regulation) Bill 2023, introduced in November last year, aims to bring OTT platforms under its ambit. Many critics have opined that the proposed content evaluation committees (CECs) under the bill could pave the way for censorship and add additional compliance burdens for these players.

Then, there are the anti-tobacco warning rules mandated by the health ministry last year, which require OTT platforms to include anti-tobacco health spots and disclaimers of 20-30 seconds in the beginning and middle of any content depicting tobacco use.

The OTT platforms have also had run-ins with the law over alleged obscene and pornographic content. Earlier this year, the Ministry of Information and Broadcasting (MIB) blocked access to 18 streaming platforms, including Uncut Adda, Dreams Films and Prime Play, for publishing vulgar content.

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