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Taxation of Media and Entertainment Under GST

Updated on:  

08 min read

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.

Taxation under Pre-GST or VAT regime

Entertainment Tax under Pre-GST regime

StateEntertainment Tax
Jharkhand110% (Nil for Jharkhand Films)
Bihar50%
Maharashtra45% (Nil for Marathi Films)
Uttar Pradesh30% to 40%
Haryana30%
Kerala30%
West Bengal30% (2% for Bengali Films)
Karnataka30% (Nil for Kannada Films)
Rajasthan30% (Nil for Rajasthani Films)
Orissa25%
Delhi20%
Gujarat20%
Madhya Pradesh20%
Andhra Pradesh20% (15% for Telugu Films)
Tamil Nadu15% (Nil for Tamil Films)
Assam, Himachal Pradesh, Jammu & Kashmir, Punjab and UttaranchalNil

Service Tax under Pre-GST regime

Tax Rate15%
Abatement60%
Effective Rate15% x 40% = 6%

Total Tax under Pre-GST regime

VAT ( Assumed)14.5%
Service Tax6%
Total Tax20.5%

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 SupplyPlace of Supply
Admission to an event or amusement park or any other place. Services ancillary to abovePlace where the event is held or place where the amusement park is located
Entertainment events and services ancillary to the aboveSupply to: 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.

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

Pre-GSTGST
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
Television: No VAT Service Tax @ 15% Entertainment tax on broadcasting services (D2H / Cable TV services) : 8-12%Television: 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.

Impact

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

Pre-GSTGST
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

Impact

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

Film Distribution

Pre-GSTGST
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 servicesTransfer 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 VATTransfer 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%

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

Pre-GSTGST
Services rendered by Artists: Service tax @ 15% on forward charge basisServices rendered by Artists: GST @ 18% on forward charge basis
Services rendered by technicians like composers, photographers: Service tax @ 15% on forward charge basisSupply 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

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

Pre-GSTGST
Liable to service tax @ 15%Liable to GST @ 18%

Impact

Increased tax rate under GST.

Advertisement

Pre-GSTGST
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 

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

Pre-GSTGST
State specific Entertainment tax ranging from 15% to 110%  (average of 30%) No VAT or Service TaxGST at 18%

Impact

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.

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