Film distribution licensing to theaters classified under SAC 999614 not broadcasting code SAC 997332

AAR Karnataka ruled that licensing services for film distribution rights from distributors to exhibitors for theatrical exhibition should be classified under SAC 999614, not SAC 997332. The authority determined that SAC 997332 covers licensing for broadcasting and showing original films, while the applicant's service involves granting exhibition rights to theaters without broadcasting capabilities. Since the distributor obtains copyright license from producers and sub-licenses exhibitors for theatrical display, this constitutes audiovisual distribution services under SAC 999614, which specifically covers distributor-exhibitor transactions as noted in the classification scheme.

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Issues Involved:
1. Classification of Licensing Services for the Right to Broadcast and Show Original Films under SAC 997332 or SAC 999614.

Summary:

Admissibility of the Application:
The application is admissible under Section 97(2)(a) of the CGST Act 2017, as it pertains to the classification of services.

Applicant's Contentions:
The applicant, a film exhibitor, intends to venture into film distribution and sought classification under SAC 997332 for "Licensing services for the Right to Broadcast and Show Original Films, Sound Recordings, Radio and Television Programmes." The applicant argued that the correct classification should be under SAC 997332 as it involves licensing services for broadcasting and showing original films. They contended that the Department's view to classify it under SAC 999614, which pertains to "Motion Picture, Videotape and Television Programme Distribution Services," is incorrect.

Findings & Discussion:
The Authority examined the relevant headings and explanatory notes to determine the appropriate classification. SAC 997332 includes licensing services for the right to reproduce, distribute, or incorporate entertainment, such as broadcasting and showing original films. However, the term "broadcast" involves transmitting via radio, television, or internet, which is not applicable in this case as the exhibitor only shows the film in theatres.

Conclusion:
The correct classification is under SAC 999614, which includes the distribution of audiovisual works, granting permission to exhibit, broadcast, and rent audiovisual works, and management services for motion picture rights. The transaction between the distributor and exhibitor falls under this category.

Ruling:
The classification of licensing services for the distribution of rights to exhibit the film by the distributor to the exhibitor is under SAC 999614.

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