TAXABILITY OF SOUND RECORDING SERVICES

[Dr. Sanjiv Agarwal]

Service tax had been imposed on sound recording services with effect from 16th July, 2001, vide Notification No. 4/2001-ST, dated 9th July, 2001. The gross amount charged by sound recording studio/agency for service rendered (excluding cost of unexposed film/tape/storage device) shall be chargeable to service tax.

Meaning of Sound Recording (Prior to Finance Act, 2005)

Section 65(98) defines ‘sound recording’ as under —

“sound recording” means recording of sound on a magnetic storage device and includes editing thereof, in any manner.

Amendment made by Finance Act, 2005 (w.e.f. 16.6.2005)

Amended Section 65(98) defines ‘Sound recording’ as under –

“Sound recording means recording of sound on any media or device including magnetic storage device, and includes services relating to recording of sound in any manner such as sound cataloguing, storing of sound and sound mixing or re-mixing or any audio post production activity”.

As per amendments made by Finance Act, 2005 w.e.f. 16-6-2005, recording of sound on any media or device will be called sound recording instead of recording on magnetic device only. Sound recording will also include any related service such as –

(i) sound cataloguing

(ii) storing of sound

(iii) sound mixing

(iv) sound remixing, or

(v) any audio post production activity

Meaning of Sound Recording Studio or Agency

Section 65(99) defines ‘sound recording studio or agency’ as under —

“sound recording studio or agency” means any person engaged in the business of rendering any service relating to sound recording.

The definition reveals that sound recording agency —

(a) must be a commercial concern upto 30-4-2006 (individuals are also covered w.e.f. 1-5-2006).

 (b) should be engaged in the business of providing services.

(c) such business or services must be related to sound recording.

Meaning of Magnetic Storage Device

Section 65(63) defines ‘magnetic storage device’ as under —

‘magnetic storage device’ includes wax blanks, discs or blanks, strips or films for the purpose of original sound recording.

As per Section 65(63), magnetic storage device is a device under which data and information is stored and memorised with the help of magnetic tapes and processes. Such devices include wax blanks, discs or blanks, strips or films for the purpose of original recording of sound. These days most of the data storage is done magnetically.

Meaning of Sound

As per Chamber’s Dictionary, sound means “the sensation of hearing, a transmitted disturbance perceived or perceptible by the ear, esp. a tone produced by regular vibration as opposed to noise, more noise, without meaning or sense or distinguished from sense, a mental impression, quality or level of noise, spoken commentary, music, etc., accompanying visual material such as filmed news footage (broadcasting and cinematography), radio as opposed to television”.

Taxable Service

Section 65(105)(zj) defines ‘taxable service’ as under —

“taxable service” means any service provided or to be provided to any person by a sound recording studio or agency in relation to any kind of sound recording.”

Board’s letter No. F. No. B. 11/1/2001-TRU, dated 9-7-2001 clarifies that any service provided by sound recording studio or agency in relation to recording of sound will be covered under the service tax net. The activities which fall under the category of service include services such as providing the facility of studio, technical persons, musical instruments and other devices or any other facility or all the facilities in a consolidated manner, required for recording of sound, editing thereof, providing different kinds of sounds from the sound library for use in theatre, films and radio; etc., services for mixing of sounds, etc. The service charges are paid for the use of these facilities and it is usually in terms of hours of usage. It is clarified that reproduction of original master to make further copies of the audio tape or CDs, etc., will not come within the purview of service tax.

Replacement of ‘client’ with ‘any person’

Finance Act 2008 has substituted the words ‘any person’ for the word ‘to a client’ w.e.f. 16.5.2008 as the service tax is levied on services and status of recipient of taxable service should not determine the tax treatment of a given service.

The essential tests for sound recording service to be taxable are :—

(i) Service should be rendered (or agreed to be rendered) by a commercial concern upto 30-4-2006 and by any person w.e.f. 1-5-2006.

(ii) Service provider must be engaged in business.

(iii) Service must relate to any service relating to sound recording.

(iv) Service must be provided to a client (upto 15-5-2008) and to any person w.e.f. 16-5-2008.

(v) Service provider must be a sound recording studio or agency.

Finance Act 2010 has introduced a new taxable service of intellectual property rights (copyrights) in relation to sound recording under clause (zzzzu) of section 65(105). Such copyright shall not be taxable under sound recording services. Normally the copyright of music vests in the composer of the music and the copyright of the music recorded vests in the producer of sound recording.

In Salem District Sound System Association v. Union of India 2001 -TMI - 35 - HIGH COURT (MADRAS), where a person was only providing sound system and nothing else for a function, and the Department was of the view to cover it under pandal or shamiana services as ‘any other article for use therein’, court held that the principle of ejusdem generis shall apply and as such, the words ‘any other articles for use therein’ providing a broader category will have to draw their colour from the accompanying earlier words (furniture, fixtures, light and light fittings etc.) which forms a class by themselves. If the legislative intent was to include sound fittings, they should have added the words ‘sound fittings’ to ‘light and light fittings’. Thus, it was held that sound system operators were not covered under pandal or shamiana service.

Person Liable

Any person being sound recording studio or agency providing sound recording service to any person shall be liable to pay service tax and shall be treated as an assessee for service tax purposes.

 

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