- The Bombay HC ruled films aren't IT software under GST despite digital delivery
- Transmission mode does not determine tax treatment of cinematographic films
- Tax authorities sought Rs 79.7 crore GST from 2017-21 for film licensing transactions
The Bombay High Court has held that a cinematographic film cannot be classified as information technology software under the GST law merely because it is delivered through a digital link or hard disk.
The court observed that the method used to transmit the content cannot determine its tax treatment.
A bench comprising Justices M S Karnik and Sandesh D Patil passed the judgment on September 10 in petitions filed by Dharma Productions Pvt Ltd and Dharmatic Entertainment Pvt Ltd. The court noted that a cinematographic film is a passive audio-visual work and does not have the characteristics required to qualify as IT software.
Rs 79.7 Crore GST Demand
The dispute related to the licensing of copyright in cinematographic films. Tax authorities had classified these transactions under SAC 998340, covering information technology software services, which attracted 18% GST during the period in question.
The state tax department had raised a demand of Rs 79.7 crore for the financial years 2017-18 to 2020-21, arguing that delivering film content through digital links or hard disks brought the transactions within IT software services.
Dharma Productions' GST Classification
Dharma Productions and Dharmatic Entertainment challenged the demand before the high court. The companies argued that they were licensing intellectual property rights in cinematographic films under SAC 997332, covering licensing services for the right to broadcast and show original films, sound recordings and television programmes.
For the period in question, this classification attracted 12% GST. The Bombay HC held that cinematographic films could not be treated as IT software merely because they were delivered digitally and set aside the disputed orders and tax demand.
(With PTI Inputs)
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