Taxation of Media and Entertainment Under GST

As a finance leader in this fast-paced industry as media and entertainment, navigating the evolving taxation landscape has turned out to be more complex. In media and entertainment, margins are often tight and consumer preferences transform rapidly. You're likely asking: How has GST reshaped taxation for media and entertainment? What are the specific implications for digital content? And how does this impact the operations and bottom line of your business?

Understanding these changes isn't just about compliance—it’s about seizing opportunities to optimise your tax strategy! In this article, we’ll guide you through how taxation has evolved from the pre-GST era, delve into the current GST framework and GST rates, while addressing the specific nuances of digital content taxation. You’ll get a clear understanding of how GST affects various facets of media and entertainment, allowing you to make informed decisions for your business.

Here’s what we’ll cover:

• Taxation under Pre-GST or VAT regime
• Taxation under GST regime
• Applicability of GST on Online Supplies of Digital Content (Music, Movies, Television Shows, etc.)
• Impact of GST on Different Activities in the Media & Entertainment Industry

Taxation under Pre-GST or VAT regime

Entertainment Tax under Pre-GST regime

Service Tax under Pre-GST regime

Total Tax under Pre-GST regime

Taxation under GST regime

Time of Supply

Time of supply of services is the earliest of the following:

• Date of issue of invoice
• Date of receipt of advance/payment.
• Date of provision of services (if invoice is not issued within prescribed period)

Time of Supply under Reverse Charge

In case of reverse charge, the time of supply for service receiver is the earliest of the following:

• Date of payment (For services only)
• 30 days from date of issue of invoice for goods (60 days for services)

Place of Supply

Place of Supply of Goods

• In case of sale of food & food products in a movie hall, the place of supply is the movie hall itself.

Place of Supply for Services

• Place of supply of services is the location of the service recipient.
• In cases where the services are provided to an unregistered dealer and their location is not available, the location of the service provider will be the place of provision of service.

Place of Supply at Movie Halls

• Place of supply is place where the service are actually performed. i.e., movie hall itself.

Place of Supply in Events

Value of Supply of Goods and/or Services

The amount collected by the seller / service provider from the buyer or service recipient respectively is the value of supply.

Applicability of GST on Online supplies of Digital Content (Music, Movies, Television Shows, etc.)

Online supplies of Digital Content (Music, Movies, Television Shows, etc.) are known as OIDAR i.e. Online Information Database Access and Retrieval services.

Case 1: Both Service Supplier and Service Recipient are in India

GST @ 18% i.e. the Service Supplier should be registered in India and shall collect GST@ 18% from the Service Recipient.

Case 2: Service Supplier is outside India and Service Recipient is in India

Place of supply would be India The manner of levy of GST on such transactions would depend on whether the Service Recipient is a Business or is a Consumer i.e. Non-Business.

I. Service Recipient is a Business entity registered under GST

The service recipient is liable to tax under the Reverse Charge Mechanism.

II. Service Recipient is not registered under GST

Service provider would also be required to get registered in India under the GST Law, collect GST from the service recipient and then deposit GST with the Govt.

Impact of GST on different activities in Media & Entertainment Industry

Exhibition of Movies

Impact

Since entertainment tax is subsumed under GST now, the overall tax burden on consumers has reduced.

Food and Beverages at Movie Halls

Taxation of Food and Beverages in Movie Theatres

Circular No. 201/13/2023-GST on 1st August 2023 clarified food and beverages are supplied independently of the cinema exhibition service. These are treated as restaurant services and taxed at 5% GST. If these sales are bundled with the cinema exhibition service (included in the ticket price), it would be considered as composite supply, and the entire supply would attract GST at the higer rate that applies to cinema exhibition.

Impact

VAT and service taxes subsumed under GST has reduced tax burden on end consumer.

Film Distribution

Impact

No issue of dual levy of Service tax and VAT on transfer of copyright for exhibition on television Reduced tax burden on Producers

Services rendered by Artists and other technicians

Impact

Increased tax rate under GST on services rendered by Artists While burden on technicians like composers, photographers is nullified, burden on producers has increased due to reverse charge tax under GST

Sponsorship and Brand Promotion

Impact

Increased tax rate under GST.

Advertisement

Impact

No tax exemption to print media. However input credit is available on services received Increased tax rate under GST for advertisement media other than print media

Amusement Parks

Impact

GST is beneficial for states with a high entertainment tax. It has adverse effect on states which already have a low entertainment tax. 

Elimination of dual tax levies of service tax and VAT on various transactions and applicability of GST through supply chain should allow the producers and studios to set off the taxes, thereby significantly reducing costs.

In addition to GST, local authorities of a few states such as Maharashtra are levying a LBET, i.e. Local Bodies Entertainment Tax ranging from 10 to 25% on movies, cable TV and DTH services. These additional taxes by local bodies appear to be a backdoor entry of entertainment tax and if continued to be levied by  local authorities, would decrease the operating margins and profits for the industry and thus would increase the cost to consumers. The entertainment industry has both positive and negative impact on state to state basis.

For those states having high entertainment tax, GST will be beneficial as it will reduce the prices for the end consumers. However, GST will have a negative impact on those states which already have a low entertainment tax. Overall, GST will help the industry to grow and flourish with increased digitization and access to data services at lower costs.