Line Producer services for film production abroad constitute import of services subject to 18% IGST under reverse charge mechanism

AAR-West Bengal ruled that a Line Producer's services for film production in Brazil constitute import of services subject to IGST under reverse charge mechanism at 18% rate. The Authority held that Line Producer supplies main production services on own account, not merely acting as agent for accommodation, catering, and logistics. Services involve comprehensive production activities including budgeting, risk management, crew coordination, and insurance coverage, making them integral to film production rather than specified exempted services under IGST Act sections 13(3)-(13). Transaction qualifies as inter-State supply requiring IGST payment by Indian film production company.

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Issues Involved:
1. Admissibility of the Application.
2. Classification of the service provided by the Line Producer.
3. Liability to pay IGST on the payments to be made to the Line Producer.
4. Applicability of IGST on reimbursements made on an actual cost basis.

Detailed Analysis:

1. Admissibility of the Application:
The Applicant intends to produce a feature film with a portion shot outside India and seeks a ruling on the liability to pay IGST on payments to CDI Virtual Films Inc. (CDIVF) as a Line Producer in Brazil. The questions raised are admissible under section 97(2)(a), (b) & (e) of the GST Act and the application is admitted since the issues are not pending nor decided in any proceedings under the GST Act.

2. Classification of the Service Provided by the Line Producer:
The Applicant submits that CDIVF will facilitate production services, including hiring local actors and providing insurance coverage. CDIVF will be paid USD 95,000 for these services. The Applicant argues that CDIVF is supplying intermediary services or event management services and should be classified under SAC 999900. However, the Authority finds that CDIVF's role as a Line Producer involves managing the budget, arranging logistics, and overseeing the production, which is classifiable under SAC 999612 as motion picture production service. The service is integral to the production of the feature film and not merely intermediary or event management services.

3. Liability to Pay IGST on the Payments to be Made to the Line Producer:
The Authority observes that the location of the recipient of the service is crucial. Since the Applicant is a resident of India, the location of the recipient is in the taxable territory. The service provided by CDIVF does not fall under sub-sections (3) to (13) of section 13 of the IGST Act, 2017. Therefore, the transaction constitutes an inter-State supply, and the Applicant is liable to pay IGST at 18% on the payments to CDIVF under Notification No. 10/2017 – IGST (Rate) dated 28/06/2017 and Notification No. 08/2017 – IT (Rate) dated 28/06/2017.

4. Applicability of IGST on Reimbursements Made on an Actual Cost Basis:
The Applicant argues that reimbursements made on an actual cost basis should not be subject to IGST. However, the Authority finds that the contract does not specify CDIVF as a pure agent. The services procured by CDIVF are a charge on him, and no deduction is available from the value of the supply of motion picture production service even if payment is made on an actual cost basis. If the contract is modified to specify CDIVF as a pure agent, the related transactions will be import of services, and the amount paid on an actual cost basis will be subjected to IGST at the applicable rate.

Ruling:
The Line Producer engaged for shooting a feature film in Brazil is supplying motion picture production service, classifiable under SAC 999612. The Applicant is liable to pay IGST on the payments made to the Line Producer at an 18% rate. No deduction is available from the value of the supply of motion picture production service even if payment is made on an actual cost basis unless the contract is modified to specify the Line Producer as a pure agent for certain services.

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