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The Media and Entertainment (M&E) industry has a wide range of activities, including film production and distribution, movie exhibitions, services provided by artists and technicians, advertising, sponsorship, brand promotion, and amusement parks. Each of these activities has specific GST implications, including applicable tax rates, place of supply rules, and their overall impact on the industry. Additionally, it is crucial to stay informed about GST regulations on Online Information Database Access and Retrieval (OIDAR) services and the growth potential of India’s M&E sector under the GST regime.
A film is essentially a story or play presented through moving pictures, typically shown in cinemas or on television. It is created by projecting a series of still photographs on film onto a screen using light in rapid succession.
Film distribution, also referred to as film exhibition or film distribution and exhibition, is the process of making a movie accessible to audiences for viewing. This involves various stages, including marketing, releasing, and showcasing the film in theaters or other platforms to reach viewers.
The time of supply for services is determined by the earliest of the following events:
For service recipients under the reverse charge mechanism, the time of supply is determined by the earliest of the following:
The place of supply is the actual location where the services are rendered, which in this case is the movie hall.
| Nature of Supply | Place of Supply |
|---|---|
| Admission to an event, amusement park, or any other place, including ancillary services. | The place where the event is held or where the amusement park is located. |
| Entertainment events and ancillary services |
|
Online supplies of digital content, such as music, movies, and television shows, fall under the category of OIDAR (Online Information Database Access and Retrieval) services.
Case 1: Both the Service Supplier and Service Recipient are in India
A GST rate of 18% applies. The service supplier must be registered in India and is required to collect GST at 18% from the service recipient.
Case 2: The Service Supplier is Outside India, and the Service Recipient is in India
The place of supply is considered to be India. The application of GST depends on whether the service recipient is a business entity or a consumer (non-business entity).
I. Service Recipient is a Business Entity Registered under GST
The service recipient is responsible for paying GST under the Reverse Charge Mechanism (RCM).
II. Service Recipient is Not Registered under GST
The foreign service provider must register under the GST law in India, collect GST from the service recipient, and remit the GST to the government.
| Pre-GST | GST |
|---|---|
| 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: Tickets priced at Rs. 100 or less attract 12% GST. Tickets priced above Rs. 100 attract 18% GST. |
| Television: No VAT. Service Tax @ 15%. Entertainment Tax on broadcasting services (D2H/Cable TV): 8-12%. | Television: GST on broadcasting services (D2H/Cable TV): 18% GST. |
| No set-off for Entertainment Tax against Service Tax or VAT paid on procurements. Tax burden ultimately falls on the customer. | Local authorities are empowered to levy and collect taxes on entertainment and amusement. |
Impact:
With Entertainment Tax subsumed under GST, the overall tax burden on consumers has been reduced.
| Pre-GST | GST |
|---|---|
| Dual levy of VAT and Service Tax. VAT @ 20.5% (assumed) and Service Tax @ 15%. | If supplied independently of cinema exhibition: Treated as restaurant services, attracting 5% GST without ITC. If bundled with cinema exhibition (composite supply): GST rate applicable to cinema exhibition (18% or 28%). |
Circular No. 201/13/2023-GST (1st August 2023) clarified that food and beverages supplied independently of cinema exhibition are taxed as restaurant services at 5% GST. If bundled with ticket prices, they are treated as a composite supply, attracting GST at the higher rate applicable to cinema exhibitions.
Impact:
Subsuming VAT and Service Tax under GST has reduced the tax burden on end consumers.
| Pre-GST | GST |
|---|---|
| Transfer of Copyright for Theatre Exhibition: Service Tax on temporary transfer of copyright for exhibition in cinemas. Producers faced an increased burden due to Service Tax on services from actors, technicians, etc. | Transfer of Copyright for Theatre Exhibition: Treated as a supply of services, attracting 18% GST (increased from 12%). |
| Transfer of Copyright for Television Exhibition: Dual levy of Service Tax and VAT due to confusion over classification as goods or services. | Transfer of Copyright for Television Exhibition: Treated as a supply of services, attracting 18% GST (increased from 12%). |
| Intellectual Property Rights (IPR) such as trademarks and copyrights were treated as goods, attracting State VAT. | Transfer of IP Rights for IT Software: GST @ 18%. |
Impact:
No dual levy of Service Tax and VAT on copyright transfers for television. Reduced tax burden on producers.
| Pre-GST | GST |
|---|---|
| Artists: Service Tax @ 15% on a forward charge basis. | Artists: Performance in folk or classical art forms (music, dance, theatre) with consideration up to Rs. 1,50,000: Nil GST. Other cases or brand ambassador services: 18% GST. |
| Technicians (composers, photographers): Service Tax @ 15% on a forward charge basis. | Technicians: Services involving transfer or use of copyright (e.g., authors, composers, photographers): 18% GST on a reverse charge basis. |
Impact:
Increased tax rate under GST for artists. While the burden on technicians is nullified, producers face higher costs due to reverse charge tax under GST.
| Pre-GST | GST |
|---|---|
| Service Tax @ 15%. | GST @ 18%. |
Impact:
Increased tax rate under GST.
| Pre-GST | GST |
|---|---|
| State-specific Entertainment Tax ranging from 15% to 110% (average of 30%). No VAT or Service Tax. | GST @ 18%. |
Impact:
GST benefits states with high Entertainment Taxes but adversely affects states with low Entertainment Taxes
Elimination of dual levies (Service Tax and VAT) and the applicability of GST across the supply chain allows producers and studios to claim input tax credits, significantly reducing costs.
However, some states (e.g., Maharashtra) levy Local Bodies Entertainment Tax (LBET) ranging from 10% to 25% on movies, DTH, and cable TV services. This additional tax could reduce operating margins and profits, increasing costs for consumers.
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For media and entertainment services, the place of supply is generally the service recipient's location. However, if the recipient is an unregistered dealer with an unknown location, the service provider's location will be considered as the place of supply.
GST at 18% applies to digital content like music, movies, and TV shows under the Forward Charge Mechanism when both the service provider and recipient are based in India.
Yes, film distribution and exhibition services are subject to GST. The rate and manner of levy depend on various factors, including the location of the service provider and recipient.
GST has streamlined the taxation process by subsuming multiple taxes into a single tax. This has reduced the cascading effect of taxes and provided a common marketplace with 'one nation, one tax'.
Media and entertainment businesses must comply with various GST regulations, including timely issuance of invoices, accurate reporting of transactions, and adherence to place and time of supply rules.
GST affects pricing strategies by influencing the overall cost structure. Businesses need to consider the GST rates and compliance costs when setting prices for their services.
