The Goods and Services Tax Act, 2017 came into effect on July 1, 2017. Through the implementation of the Goods and Services Act, 2017, Goods and Services Tax (GST) was introduced as an indirect tax (or consumption tax) used in India on the supply of goods and services. Various taxes and levies, such as Central Excise Duty, Services Tax and Additional Customs duty, etc. have been subsumed under the Goods and Services Tax (GST). Such incorporation of multiple taxes under a single head Goods and Services Tax (GST) has enabled the unrestrained flow of tax credits both at the Centre and the States. This blog focuses on highlighting the major changes that took place in a tax perspective with the execution of the Goods and Services Tax (GST) Act, 2017.
Central Taxes subsumed under the GST regime. State Taxes subsumed under the GST regime.
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CENVAT or Central Value Added Tax.
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Value Added Tax charged by the State.
Excise Duty chargeable on Medicinal and Toiletries Preparations under the Medicinal and Toiletries Preparations (Excise Duties) Act, 1955.
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Central Sales Tax
Additional Excise Duty attracted by goods of special importance got subsumed.
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Luxury Tax.
Special Additional Customs Duty.
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Entry Tax levied by the recipient state on the goods entering within its territory from another state.
Additional Customs Duty.
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Entertainment and Amusement Tax charged by movie theatres, amusement parks, circus, and exhibition, etc.
Service Tax.
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Advertisement Tax.
Additional Duty of Excise on textile products.
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Purchase Tax.
Surcharge and Cess charged by the Centre on the supply of goods.
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Taxes on lotteries, betting, and gambling.
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Surcharge and Cess charged by the States on the supply of goods.
The Media and Entertainment Industry: Prior to the implementation of GST
1. Sale of Movie Tickets: Movie tickets did not attract the levy of service tax or value-added taxes. Nevertheless, the entertainment tax was charged by the respective states at the rate of 15 percent to 110 percent. A standard rate of 30 percent was charged as entertainment tax on the sale of movie tickets. Entertainment taxes were disembarked against service tax and value-added tax paid by the distributor. Entertainment Tax was not set apart against Service Tax and Value Added Tax paid by the distributor. The tax burden was imposed in an accumulative manner. The ultimate consumer had to cover the costs of taxes to be paid by the distributor (Sales Tax and Value Added Tax) as well as that of the multiplex/theatre owner (Entertainment Tax).
2. Television and DTH Services: Television and DTH Services attracted dual taxation of both Service Tax and Entertainment Tax. Service Tax was collected at the rate of 15 percent and Entertainment Tax was chargeable at the rate of 8 to 12 percent on broadcasting services.
3. Food and Beverages (F&B): The dual levy of Value Added Tax on the supply of Foods and Beverages at theatre counters was an issue. Food and beverage products that were directly bought from the market and sold at movie theatres did not attract taxes. However, in circumstances where the step of “preparation” was involved in making the final food or beverage products, service taxes were imposed on the supply of such products.
4. Film Distribution:
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Taxability of display of movies in theatres:
Temporary transfer or permitting the use of enjoyment of copyright relating to cinematographic films for exhibition in a cinema hall or theatre was chargeable to Service Tax. Intellectual Property Rights such as Trademarks and Copyrights were also considered to be goods due to which they attracted the State Value Added Tax. However, grants of license for theatrical release were exempted from Service Tax.
The producers had to bear significant tax costs on procurement of goods and services including service tax charged by technicians, actors, and other staff members due to the exemption from Service Tax and Value Added Tax.
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Taxability on the exhibition of television shows:
Where the content rights or copyrights of a particular television show have been leased, double taxation was imposed. There was a constant confusion revolving around the question: Whether the exhibition of television shows whose content rights have been leased/transferred shall be considered as a good or a service?
It was further clarified that if the transaction was considered to be that of the sale of goods, then Value Added Tax (VAT) would be imposed by the State Government. In contrast, if the transaction was to be treated as a supply of services, Service Tax was to be levied by the Central Government. Thus, this was a circumstance of double taxation, which included both Value Added Tax (VAT) and Service Tax. Such transactions set off conflicts between the two Acts, namely, the Sales Tax Act, 1994 and the Value Added Tax Act. 2005. As a result, the transactions were made liable to both the Service Tax and the Value Added Tax in many cases, whereby the burden of tax multiplied.
For instance, in the State of Maharashtra, Service Tax was taxable at the rate of 15% and Value Added Tax was taxable at the rate of 6%. So the total tax burden imposed was 21%. Such tax burdens of various indirect taxes created a lot of pressure on the taxpayers.
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Advertisement Sector: Printing media services attracted no levy of Service Tax. Apart from the print media, all other advertisement amenities were taxable at the rate of 15 percent.
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Tax liability on entertainment artists, publicity, and brand promotion: Service Tax of about 15 percent was payable by the film or entertainment artists on the forward-charge basis. Marketing and publicity services are subject to certain exceptions attracted by Service Tax.
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Amusement Parks: Double taxation on the enjoyment of the services of an amusement park was levied. Service Tax was imposed at the rate of 15 percent as well as Entertainment tax at the rate of 1.5 to 110 percent was imposed. The pre-GST system supported the creation of social infrastructure and also helped in attracting tourism for the country.
The Media and Entertainment Industry: After the implementation of the GST Act, 2017
1. Sale of Movie Tickets: In cases where the price of the movie ticket is INR 100 or less, the rate of GST applicable is 18%. Whereas, in cases where the price of the movie ticket is more than INR 100, the rate of GST applicable is 28%.
Later, in December 2018, the GST Council announced to slash taxes that are chargeable on movie tickets. This decision turned out to be advantageous for the media and entertainment industry. The Goods and Services Tax (GST) rate was reduced on cinema tickets costing over INR 100 to 18% from 28%. For cheaper tickets, the GST rate was reduced to 12% from 18%. This brought some relief to multiplex businesses that had been seeking a reduction in the rates since the GST system came into effect. This change in GST rates gave momentum to the “Indian film industry”, thereby ensuring the expansion of multiplex businesses in smaller towns of the country.
2. Television and DTH Services: Television and DTH Services which comprise of Broadcasting and Cable Services such as Tata Sky, Airtel DTH, Dish TV, etc., attract Goods and Services Tax (GST) at the rate of 18%.
3. Food and Beverages (F&B): Supply of Food and Beverages over the counter at theatres, cinema halls and multiplexes are treated as restaurant services, and hence, the Goods and Services Tax levied on Food and Beverages is at the rate of 18% (in case of Air Conditioned counters) and 12% (in case of non- Air Conditioned counters).
4. Film Distribution: Exhibition of films or movies whose copyrights have been permanently or temporarily transferred or leased shall be treated as supply of services, thereby attracting Goods and Services Tax at the rate of about 12 percent. Goods and Services Tax imposed on the grant of license for showcasing films or movies in theatre necessitates an increase in the working capital requirement. It also allows a smooth flow of input tax credit in the value chain.
5. Advertisement Sector: Goods and Services Tax (GST) at the rate of 5% is levied on the selling of space for the advertisement in print media. Print Media includes Newspaper and Book (both defined under Section 1(1) of Press and Registration Act, 1867) but does not include business directories, yellow pages, and trade catalogs which are primarily meant for commercial purposes.
Suppliers of advertising services are eligible to claim input Goods and Services Tax (GST) credit on the fulfillment of certain conditions as mentioned under the Goods and Services Tax Act, 2017. However, for taking credit, Goods, and Services Tax (GST) registration is mandatory.
All other advertising services attract Goods and Services Tax (GST) at a rate of 18%. Goods and Services Tax (GST) is in addition to the equalization levy introduced on online or digital advertising.
6. Artistes, Sponsorship/Brand Promotion:
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Artistes:
Authors, Music Composers, Photographers, or Artists who supply services, if the transfer or permit the use or enjoyment of their copyright in their original literary, dramatic, musical or artistic works (as protected under Section 13 (1)(a) of the Copyrights Act, 1957) to publishers, music companies, producers, or the like, are liable to pay Goods and Services Tax (GST) at the rate of 18% on a reverse charge basis. This means that the burden of paying Goods and Services Tax at the rate of 18% is levied on the recipient of the services.
The supply of services by artistes other than above is liable to pay Goods and Services Tax at the rate of 18% on a forward charge basis.
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Sponsorship:
Services that are provided by way of sponsorship to any corporate body or partnership firm in the taxable territory is covered under Reverse Charge Mechanism (RCM) in Goods and Services Tax (GST). On the other hand, if such sponsorship services are provided to any other person (other than a corporate body or partnership firm) will be taxable by the standard forward charge mechanism. Such a tax burden is imposed on the supplier of sponsorship services.
Goods and Services Tax (GST) at the rate of 18% is levied on a supply of sponsorship services.
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Brand promotion:
Brand Promotion services are also liable at the rate of 18% of Goods and Services Tax (GST).
7. Amusement Parks: The Goods and Services Tax (GST) Council recommended a reduction of the Goods and Services Tax rate on tickets to amusement parks including theme parks, water parks, joy rides, merry-go-rounds, go-carting, and ballet, from 28% to 18% effective from 25th of January, 2018. The admission threshold for admission tickets to circus, dance, and theatrical performances was also doubled to INR 500. This measure was adopted by the Ministry to boost sports activities in the country.
-Anuradha Panda
KIIT School of Law
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