Levy of ST post 1-7-12 on Film distribution, theatres etc

[RAJESH SANGHVI]

The assesee an Indian company procures film distribution rights under royalty agreement with foreign producers either on Minimum Guarantee (MG)  or percentage basis. In turn the exhibition rights of these films are given to distributors in India also on Minimum Guarantee basis. These film rights are also given to TV channels or these films are also exhibited in Cinemas either on fixed rent basis or sales revenue sharing basis. 

In Notification No. 25, Exempt services u/s 66B, in clause (15). Temporary transfer or permitting the use or enjoyment of a copyright covered under clauses (a) or (b) of sub-section (1) of section 13 of the Indian Copyright Act, 1957 (14 of 1957), relating to original literary, dramatic, musical, artistic works or cinematograph films;

Hence will such revenues by the said Indian company from MG or otherwise attract ST @12.36 % ??

[Brijesh Verma]

Exhibiting in Cinemas is a negative list entry as the same is an entertainment event. Further Exemption is in relation to films being exhibited in theaters only and not on television.... 

[viswanathan RAVI]

Model	Type of Model	Service tax	Remarks and references
First  ***	Exhibitor paying Fixed consideration to distributor/producer to exhibit the film in a theatre	It is exempt vide Notification No. 25/2012 and High court Order.	From 01.07.2010 onwards
Snd	Distributors/Producer paying fixed Rent to the exhibitor	ST attracted under Renting of Immovable Property	Taxable from Feb 2009 onwards CBEC Circular No 109/03/2009 dated 23.02.2009
Third	Distributors/producer sharing with Exhibitor the collection on a percentage basis	Service tax attracted under Business Support Services	Taxable from Feb 2009 onwards  CBEC Circular No 109/03/2009 dated 23.02.2009 and Circular No.148/7/2011 dt 13.12.2011

 ***

However the Distributors becomes a service provider and has to collect Service tax on the Fixed Film Hire charges received from the Exhibitor. Hence in this model also there is levy of Service tax which ultimately  to be borne by the exhibitor unless expressly agreed to be borne only by the Distributor.

AI Summary

Service tax on film exhibition: theatrical fixed-hire exempt, rent and revenue-sharing models attract taxable services and collection obligations. Service tax depends on the contractual model: exhibitor paying fixed consideration for theatrical exhibition is exempt under Notification No.25/2012 as a negative-list entertainment event (exemption does not extend to television). Fixed rent arrangements are taxable as Renting of Immovable Property, and revenue-sharing arrangements are taxable as Business Support Services. Distributors acting as service providers must collect service tax on fixed film-hire charges received from exhibitors, the burden of which falls on the exhibitor unless contractually allocated otherwise.