PAYMENT TO CINE OR TV ARTISTS. LIABILITY UNDER RCM, Goods and Services Tax - GST

[Sadanand Bulbule]

Dear experts

1] Serial number 9 of the Notification No.13/2017-Central Rate dated 28/06/2017 issued under Section 9[3] of the CGST Act, 2017 reads as under:

[9] Supply of services by a music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original dramatic, musical or artistic works to a music company, producer or the like.

Meaning:

2] Transfer or permitting the use or enjoyment of a copyright will be covered under Reverse charge mechanism to the extent of original literary, dramatic, musical and artistic works only. This is because only works covered under Section 13(1)(a) of the Copyright Act 1957 are specified in the Reverse Charge Notification[supra].

3] Section 13 of the Copyright Act 1957--Works in which copyright subsists.-

(1) Subject to the provisions of this section and the other provisions of this Act, copyright shall subsist throughout India in the following classes of works, that is to say,-

(a) original literary, dramatic, musical and artistic works;

Query:

In view of the legal position of both the GST Notification No.13/2017 and Section 13[1][a] of the Copyright Act 1957, whether the producer [recipient of services] of Cinema/TV serials is liable to pay GST under RCM on payment of remuneration paid to the artists [who are not liable for GST registration] for their performance of tasks entrusted to them?

Essentially such artists do not have their “own creativity” or freedom to perform their own way except to perform tasks as per the directions of the director/producer. Under such circumstances, the role of Section 13[1][a] of the Copyright Act 1957 does not play at all.

I am of the considered opinion that, the producers cum recipient of such services are not liable to pay tax under RCM on payments made to such artists

Despite this position, the authorities are insisting the producers to pay tax under RCM on receipt of such services. So experts are requested to enlighten in depth with illustrations in the larger interest of all.

Posts / Replies

[Alkesh Jani]

Shri Kasturiji Sirji,

As a learner, I wish to put the issue (GST point of view) as under:-

(i) The actor is supplier of service.

(ii) It is a taxable service

(iii) The service is to be classified under “dramatic works”.

Now coming to Sl. No. 9 of the Notification No. 13/2017

Supply of services by an author, music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer or the like. ((here I am of the view that original literary is for literary only and not original dramatic, original musical, original artistic).

Here, the supplier of service is ‘Author’.

As per Section 2(d) of the Copyright Act “author” means,— (i) in relation to literary or dramatic work, the author of the work;

Recipient of Service Publisher, music company, producer or the like, located in the taxable territory

From above, the actor is the author of the performance made by him, either live or in front of camera. If there is agreement, for such performance with the producer or the like, makes the producer or the like, liable to pay GST.

Summarizing the above, I am of the view that if the actor is supplying the service, as an author, by way of transfer or permitting the use or enjoyment of a copyright, the producer of like is liable to pay GST on Reverse Charge Basis in terms of Sl. No. 9 of the Notification No. 13/2017 read with Section 9(3) of the CGST Act, 2017.

This is the best of all I have. In either case, it is open for the person to opt for advance ruling or need to wait till legal forums takes their view on the issue.

My special thanks to Shri Sadanand Bulbule ji for raising such an interesting and debatable query.

Thanks

With Due Regards

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

Now it is worthwhile to say,  "Dissent is decent".

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

An extract of your reply.

"Here I am of the view that original literary is for literary only and not original dramatic, original musical, original artistic"

While interpreting statutes, the importance of punctuation marks cannot  be brushed aside. 

[KASTURI SETHI]

The punctuation marks are pillars of a language.  The power of punctuation marks is unquestionable.

[Sadanand Bulbule]

Dear all, in continuation of my posting at Sl No. 7, please the refer the following:

Circular No. 178/10/2022-GST

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, There is no room for any doubt. You are already on right track from the first day itself i.e. your opinion expressed in the query itself.

By the time SCN is issued, you will get more sufficient legal material in favour of your client. You have tight grip on this issue.

[Padmanathan Kollengode]

RCM entry is:

[9] Supply of services by a music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original dramatic, musical or artistic works to a music company, producer or the like.

The activity involved is an artist performing for which remuneration is paid by producer. Here the artist does not transfer or permit the use or enjoyment of a copyright. Hence, in my view, RCM is not applicable to the said transaction.

[Sadanand Bulbule]

Dear all

I am happy to inform that, based on the stunning outcome of this comprehensive discussion, one of the taxpayers was successful in convincing the Adjudicating Authority that, payment made to TV artists is not liable to tax under RCM under Entry No.9 of Notification No. 13/2017-CTR dated 28/06/2017. And the Adjudicating Authority in Bengaluru who had initiated proceedings under Section 73 for the year 2019-20 has dropped SCN on 28/08/2024 considering the merits of taxpayer's contention.

Kudos to all experts for soulful contributions. May their tribe increase.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

                       Sir,  Heartiest congratulations to you. It is a matter of immense pleasure not only for the party but  for all experts who worked hard on this issue wholeheartedly. 

                            I am also thankful to you for asking an inquisitive query. You laid the foundation for decision on merits. 

[Sadanand Bulbule]

🙏🙏 Sirji. 

[Sadanand Bulbule]

Dear all

It is disheartening to note that, despite incontrovertible statements made by the experts, the authorities are unwilling to accept the legal position on this issue for ‘‘private’ reasons. 
So I request the CBIC to issue suitable clarification to get rid of needless litigation and restore peace of mind. 

[Sadanand Bulbule]

Dear all

Despite presenting such best results arising out of experts’ valuable experience, some authorities have refused to appreciate the legal significance and fastened the tax, interest and penalty for “private” reasons. 

This is the clear abuse of adjudication power. So I appeal to the CBIC to issue suitable clarification to prevent further damage to the film/TV industry.