Media and entertainment market in India is globally the fifth largest. Digital India initiative, penetration of smartphones at affordable prices, and reduced data tariffs have further boosted this arena.
This article covers taxation and Impact of GST on the Media & Entertainment sector
1. Taxation under Pre-GST or VAT regime
- Entertainment Tax under Pre-GST regime:
||110% (Nil for Jharkhand Films)
||45% (Nil for Marathi Films)
||30% to 40%
||30% (2% for Bengali Films)
||30% (Nil for Kannada Films)
||30% (Nil for Rajasthani Films)
||20% (15% for Telugu Films)
||15% (Nil for Tamil Films)
|Assam, Himachal Pradesh, Jammu & Kashmir, Punjab and Uttaranchal
- Service Tax under Pre-GST regime:
||15% x 40% = 6%
- Total Tax under Pre-GST regime:
|VAT ( Assumed)
2. Taxation under GST regime
Time of Supply for Services
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
|Nature of Supply
||Place of Supply
|Admission to an event or amusement park or any other place.
Services ancillary to above
||Place where the event is held or place where the amusement park is located
|Entertainment events and services ancillary to the above
Registered person – Location of the registered person
Unregistered person – Location of the event.
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.
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.
GST @ 18% i.e. the Service Supplier should be registered in India and shall collect GST@ 18% from the Service Recipient.
- Case 1: Both Service Supplier and Service Recipient are 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.
- Case 2: Service Supplier is outside India and Service Recipient is in India
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.
3. Impact of GST on different activities in Media & Entertainment Industry
Exhibition of Movies
|Sale of Movie tickets:
No VAT or Service Tax
State specific Entertainment tax ranging from 15% to 110% (average of 30%)
||Sale of Movie tickets:
Where price of tickets is Rs.100 or less : 18% GST
Where price of tickets is more than Rs.100 : 28% GST
Service Tax @ 15%
Entertainment tax on broadcasting services (D2H / Cable TV services) : 8-12%
GST on broadcasting services (D2H / Cable TV services) : GST at 18%
|No set off for Entertainment Tax against Service Tax or VAT paid on procurements.
Burden of taxes ultimately on customer.
||Authority given to local bodies to levy and collect taxes on entertainment and amusement.
Since, Entertainment tax is subsumed under GST now,
Overall tax burden on consumers is set to reduce where Entertainment tax was higher than GST rate
Entertainment tax levied by local bodies leads to cascading effect of taxes since Entertainment tax amount would be included in the base value for levy of GST.
Food and Beverages at Movie Halls:
|Dual levy of VAT and Service tax
VAT @ 20.5% (Assumed) and Service tax @ 15%
||Supply of Food and Beverages at theaters is to be treated as restaurant services
GST rate of 18% in case of supply at A/c counters
and 12% at non- A/c counters
VAT & Service taxes subsumed under GST
Reduced tax burden on end consumer
Issues regarding classification of an activity as a sale of goods or services
|Transfer of copyright for exhibition of movies in Theatre:
Service Tax on temporary transfer of copyright relating to cinematograph films for exhibition in a cinema hall or theatre.
Increased burden on producers on procurement of services for service tax charged by actors, technicians etc.
||Transfer of copyright for exhibition in Theatre:
Treated as supply of services
GST rate of 12%
|Transfer of copyright for exhibition on Television:
Issue of dual levy of Service tax and VAT on transfer of copyright for exhibition on television due to confusion in classification of the activity as a sale of goods or services
||Transfer of copyright for exhibition in Television:
Treated as supply of services
GST rate of 12%
|IPR such as trademarks, copyrights were also treated as goods and attracted state VAT
||Transfer of Intellectual Property (IP) right in respect of Information Technology software:
GST at the rate of 18%
Transfer of Intellectual Property (IP) right in respect of goods other than Information Technology software:
GST at the rate of 12%
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
|Services rendered by Artists: Service tax @ 15% on forward charge basis
||Services rendered by Artists: GST @ 18% on forward charge basis
|Services rendered by technicians like composers, photographers: Service tax @ 15% on forward charge basis
||Supply of services by an author, music composer, photographer, artist or the like by way of transfer or permitting the use of a copyright:
18% GST on reverse charge basis
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
|Liable to service tax @ 15%
||Liable to GST @ 18%
Increased tax rate under GST.
|Print media: Exempt from service tax
Others: Service tax @ 15%
||Print media: GST @ 5%
Others: GST @ 18%
Availability of input tax credit on the taxes paid on the advertisements
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
|State specific Entertainment tax ranging
from 15% to 110% (average of 30%)
No VAT or Service Tax
||GST at 18%
GST will be beneficial for states with a high entertainment tax
Adverse effect on states which already have a low entertainment tax
Negative impact on creating social infrastructure and attracting tourism for the country
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.