Understanding GST's Impact on the Media and Entertainment Industry
This article provides an in-depth analysis of how the Goods and Services Tax (GST) has transformed the taxation landscape for India's media and entertainment industry. It details the shift from a complex pre-GST regime, with varied entertainment and service taxes, to the streamlined GST framework. The piece clarifies key aspects like time, place, and value of supply, alongside the specific GST implications for online digital content and various industry activities, offering vital insights for financial decision-makers.
Finance professionals in the dynamic media and entertainment sector face intricate taxation challenges. This industry, characterized by narrow profit margins and swift shifts in consumer trends, prompts important questions: What changes has the Goods and Services Tax (GST) introduced for media and entertainment? How specifically does it affect digital content? What are the operational and financial implications for businesses? Beyond mere compliance, grasping these shifts enables optimization of tax strategies. This article explores the progression of taxation from the pre-GST period to the current GST framework, including GST rates, with a focus on digital content. Readers will gain clear insights into GST's influence across various segments of the media and entertainment industry, empowering them to make well-informed business decisions.
Taxation Under the Pre-GST or VAT Regime
Before the introduction of GST, the media and entertainment sector was subject to various taxes, including state-specific entertainment taxes and service tax.
Entertainment Tax Before GST
States levied differing entertainment taxes, sometimes reaching high percentages. For instance:
| State | Entertainment Tax |
|---|---|
| Jharkhand | 110% (0% for Jharkhand Films) |
| Bihar | 50% |
| Maharashtra | 45% (0% for Marathi Films) |
| Uttar Pradesh | 30% to 40% |
| Haryana | 30% |
| Kerala | 30% |
| West Bengal | 30% (2% for Bengali Films) |
| Karnataka | 30% (0% for Kannada Films) |
| Rajasthan | 30% (0% for Rajasthani Films) |
| Orissa | 25% |
| Delhi | 20% |
| Gujarat | 20% |
| Madhya Pradesh | 20% |
| Andhra Pradesh | 20% (15% for Telugu Films) |
| Tamil Nadu | 15% (0% for Tamil Films) |
| Assam, Himachal Pradesh, Jammu & Kashmir, Punjab and Uttaranchal | 0% |
Service Tax Before GST
A 15% service tax was applicable, with an abatement of 60%, resulting in an effective rate of 6% (15% x 40%).
Total Tax Under the Pre-GST Regime
Combining an assumed VAT of 14.5% and the 6% service tax, the total tax burden was approximately 20.5%.
Taxation Under the GST Regime
The GST regime simplified taxation by subsuming various indirect taxes.
Time of Supply
The time of supply for services is determined by the earliest of these events:
- The date the invoice is issued.
- The date the advance or payment is received.
- The date services are provided (if the invoice is not issued within the specified period).
Time of Supply Under Reverse Charge
For reverse charge mechanisms, the time of supply for the service recipient is the earliest of:
- The date of payment (applicable only for services).
- 30 days from the invoice date for goods, or 60 days for services.
Place of Supply
The place where goods or services are considered supplied is crucial for determining tax jurisdiction.
Place of Supply for Goods
When food and food products are sold within a movie hall, the place of supply is the movie hall's location itself.
Place of Supply for Services
Generally, the place of supply for services is the location of the service recipient. If the service is provided to an unregistered dealer and their location cannot be determined, the service provider's location becomes the place of provision.
Place of Supply at Movie Halls
For services performed at movie halls, such as film exhibition, the place of supply is the movie hall itself.
Place of Supply in Events
| Nature of Supply | Place of Supply |
|---|---|
| Admission to an event, amusement park, or similar venue, and ancillary services. | The location where the event is held or the amusement park is situated. |
| Entertainment events and related services. | Supply to: Registered person – Location of the registered person. Unregistered person – Location of the event. |
Value of Supply of Goods and/or Services
The value of supply represents the amount collected by the seller or service provider from the buyer or recipient, respectively.
Applicability of GST on Online Digital Content Supplies
Online supplies of digital content, including music, movies, and television shows, are categorized as OIDAR (Online Information Database Access and Retrieval) services.
Case 1: Both Supplier and Recipient are in India
If both the service supplier and recipient are located in India, GST is levied at 18%. The service supplier must register in India and collect 18% GST from the recipient.
Case 2: Service Supplier is Outside India and Recipient is in India
In this scenario, India is the place of supply. The GST levy depends on whether the service recipient is a business or a consumer.
I. Service Recipient is a GST-Registered Business Entity
The service recipient is responsible for paying tax under the Reverse Charge Mechanism.
II. Service Recipient is Not Registered Under GST
The foreign service provider must register in India under GST law, collect GST from the service recipient, and deposit it with the government.
Impact of GST on Various Media & Entertainment Industry Activities
GST has significantly altered the tax landscape for different aspects of the media and entertainment industry.
Exhibition of Movies
| Pre-GST | GST |
|---|---|
| Sale of Movie tickets: No VAT or Service Tax. State-specific entertainment tax ranged from 15% to 110% (average 30%). | Sale of Movie tickets: 12% GST for tickets priced at ₹100 or less; 18% GST for tickets priced over ₹100. |
| Television: No VAT. Service Tax at 15%. Entertainment tax on broadcasting services (D2H / Cable TV): 8-12%. | Television: GST on broadcasting services (D2H / Cable TV services): 18% GST. |
| No set-off for entertainment tax against Service Tax or VAT paid on procurements. Tax burden ultimately fell on the consumer. | Local bodies are permitted to levy and collect taxes on entertainment and amusement. |
Impact: The subsumption of entertainment tax under GST has generally led to a reduction in the overall tax burden for consumers.
Food and Beverages at Movie Halls
| Pre-GST | GST |
|---|---|
| Dual levy of VAT and Service tax (e.g., VAT at 20.5% and Service tax at 15%). | If supplied as a separate service, independent of cinema exhibition, then taxed at restaurant service rates – 5% GST without Input Tax Credit (ITC). |
| If bundled with cinema exhibition as a composite supply, the entire supply attracts GST at the rate applicable to the principal supply (cinema exhibition) – 18% or 28% GST, as relevant. |
Taxation of Food and Beverages in Movie Theatres:
A clarification from Circular No. 201/13/2023-GST, dated August 1, 2023, states that food and beverages sold independently of cinema exhibition are treated as restaurant services and are subject to 5% GST. If these sales are combined with the cinema ticket price, forming a composite supply, the higher GST rate applicable to cinema exhibition applies to the entire bundled service.
Impact: The integration of VAT and service taxes into GST has decreased the tax load on the final consumer.
Film Distribution
| Pre-GST | GST |
|---|---|
| Transfer of copyright for exhibition in Theatre: Service Tax applied to temporary transfer of cinematograph film copyrights for exhibition. Producers faced increased burden from service tax charged by actors, technicians, etc. | Transfer of copyright for exhibition in Theatre: Classified as a supply of services, attracting an 18% GST rate (an increase from the previous 12%). |
| Transfer of copyright for exhibition on Television: Ambiguity existed regarding dual levy of Service tax and VAT due to classification issues (sale of goods vs. services). | Transfer of copyright for exhibition in Television: Classified as a supply of services, attracting an 18% GST rate (an increase from the previous 12%). |
| Intellectual Property Rights (IPR) like trademarks and copyrights were treated as goods, attracting state VAT. | Transfer of Intellectual Property (IP) rights for Information Technology software attracts 18% GST. |
Impact: The GST regime resolved the dual levy issue for copyright transfers for television exhibition. It has also helped reduce the tax burden on producers.
Services Rendered by Artists and Technicians
| Pre-GST | GST |
|---|---|
| Services by Artists: 15% Service tax on a forward charge basis. | Services by an artist in folk or classical art forms (music, dance, theatre) are exempt if the consideration is ₹1,50,000 or less. |
| In other scenarios, or if the artist acts as a brand ambassador, 18% GST applies. | |
| Services by technicians (composers, photographers): 15% Service tax on a forward charge basis. | Supply of services by an author, music composer, photographer, artist, or similar professional involving the transfer or permission to use a copyright, is subject to 18% GST under the reverse charge mechanism. |
Impact: Artists' services face an increased tax rate under GST. While the direct burden on technicians like composers and photographers is lessened, producers see an increased burden due to the reverse charge tax under GST.
Sponsorship and Brand Promotion
| Pre-GST | GST |
|---|---|
| Subject to 15% service tax. | Subject to 18% GST. |
Impact: The GST regime introduced an increased tax rate for sponsorship and brand promotion activities.
Advertisement
| Pre-GST | GST |
|---|---|
| Print media: Exempt from service tax. Others: 15% service tax. | Print media: 5% GST. Others: 18% GST. Input Tax Credit is available on taxes paid for advertisements. |
Impact: Print media no longer enjoys tax exemption but can avail input tax credit on advertisement services. Other advertisement media experience an increased tax rate under GST.
Amusement Parks
| Pre-GST | GST |
|---|---|
| State-specific entertainment tax ranged from 15% to 110% (average 30%). No VAT or Service Tax. | 18% GST. |
Impact: GST is advantageous for states that previously had high entertainment taxes, as it potentially lowers consumer prices. However, it may negatively affect states with already low entertainment taxes.
The elimination of dual tax levies, such as service tax and VAT, across various transactions and the application of GST throughout the supply chain enable producers and studios to claim input tax credits. This significantly reduces overall costs. Despite GST, some local authorities, like in Maharashtra, impose a Local Bodies Entertainment Tax (LBET) of 10-25% on movies, cable TV, and DTH services. Such additional local taxes, if continued, could diminish operating margins and profits for the industry, thereby increasing consumer costs. The entertainment industry's overall impact under GST varies by state. While GST benefits states with high pre-existing entertainment taxes by lowering consumer prices, it may disadvantage those with previously low taxes. Broadly, GST is expected to support industry growth, fostering increased digitization and more affordable access to data services.