Tdayment to content authors

[Rajat Singhania]

In case of online education platforms, agreements are done with content authors and exclusive rights are transferred to the publishing platforms. In the instant case, an online education platform entered into a agreement with an author for providing video recordings of a course content and related support services. The consideration agreed to was divided into two parts: the first consisted of a guaranteed agreed value and the other part worked on a revenue sharing model under which the author would get a specific % of the revenue generated from the fee collected from subscribers.

Now, two question arises:

1. Would it be considered as sale of content or would fall under royalty income.

2. If it is under royalty, would GST on reverse charge be charged on it?

The online platform in question is an unregistered party under GST.

[KASTURI SETHI]

(1) It is a sale of content and NOT under the category of "Royalty" . Your transaction is covered under OIDAR services. Go through CBEC's Flyer No.42 dated 1.1.18. You will get reply to all queries in this circular.

[KASTURI SETHI]

Regarding revenue sharing model, peruse all the replies of experts against Issue ID number 116204 dated 14.4.2020.It is for your additional knowledge. I am not aware of the terms and conditions of the agreement executed with an author. So I have referred to this Issue ID. Study all replies in view of your agreement.

[KASTURI SETHI]

Also see the following decision of AAR in this context :

2020 (5) TMI 219 - AUTHORITY FOR ADVANCE RULING, TAMILNADU IN RE: VENBAKKAM COMMANDUR JANARDHANAN, (PROPRIETOR M/S. LAW WEEKLY JOURNAL)

AI Summary

Sale vs Royalty classification: content transfers treated as OIDAR services, affecting GST treatment and revenue-share queries. Payments to an author for recorded course content and support are characterised as a sale of content and treated as OIDAR services under CBEC guidance rather than as royalty. The adviser notes the guaranteed fee plus revenue-share arrangement remains within that framework, and refers queries on reverse charge, revenue sharing and the effect of an unregistered platform to prior expert replies and an AAR decision, emphasising that characterisation depends on the agreement terms.