PAYMENT TO CINE OR TV ARTISTS. LIABILITY UNDER RCM

[Sadanand Bulbule]

Dear experts

1] Serial number 9 of the Notification No.13/2017-Central Rate dated 28/06/2017 issued under Section 9[3] of the CGST Act, 2017 reads as under:

[9] Supply of services by a music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original dramatic, musical or artistic works to a music company, producer or the like.

Meaning:

2] Transfer or permitting the use or enjoyment of a copyright will be covered under Reverse charge mechanism to the extent of original literary, dramatic, musical and artistic works only. This is because only works covered under Section 13(1)(a) of the Copyright Act 1957 are specified in the Reverse Charge Notification[supra].

3] Section 13 of the Copyright Act 1957--Works in which copyright subsists.-

(1) Subject to the provisions of this section and the other provisions of this Act, copyright shall subsist throughout India in the following classes of works, that is to say,-

(a) original literary, dramatic, musical and artistic works;

Query:

In view of the legal position of both the GST Notification No.13/2017 and Section 13[1][a] of the Copyright Act 1957, whether the producer [recipient of services] of Cinema/TV serials is liable to pay GST under RCM on payment of remuneration paid to the artists [who are not liable for GST registration] for their performance of tasks entrusted to them?

Essentially such artists do not have their “owncreativity” or freedom to perform their own way except to perform tasks as per the directions of the director/producer. Under such circumstances, the role of Section 13[1][a] of the Copyright Act 1957 does not play at all.

I am of the considered opinion that, the producers cum recipient of such services are not liable to pay tax under RCM on payments made to such artists

Despite this position, the authorities are insisting the producers to pay tax under RCM on receipt of such services. So experts are requested to enlighten in depth with illustrations in the larger interest of all.

[Sadanand Bulbule]

Dear Sethi Sirji

Here I wish to add couple of words:

As far as movies are concerned, it is a show  of " light & sound" projected in the darkness. And the unreal is made to experience as real for that moment.

Whereas in drama theatre, it is  the " live"  performance of artists in the presence of audience,  physically face to face. That's it.

Rest is all beautifully deciphered by you and I too stand by it, the way I contended while the opening this issue.

 Humble gratitude & warm regards

[Amit Agrawal]

Relevant portion from Section 17 of the Copyright Act, 1957 is re-produced below:

"First owner of copyright.— Subject to the provisions of this Act, the author of a work shall be the first owner of the copyright therein: Provided that—

(a) in the case of a literary, dramatic or artistic work made by the author in the course of his employment by the proprietor of a newspaper, magazine or similar periodical under a contract of service or apprenticeship, for the purpose of publication in a newspaper, magazine or similar periodical, the said proprietor shall, in the absence of any agreement to the contrary, be the first owner of the copyright in the work in so far as the copyright relates to the publication of the work in any newspaper, magazine or similar periodical, or to the reproduction of the work for the purpose of its being so published, but in all other respects the author shall be the first owner of the copyright in the work;

(b)  subject to the provisions of clause (a), in the case of a photograph taken, or a painting or portrait drawn, or an engraving or a cinematograph film made, for valuable consideration at the instance of any person, such person shall, in the absence of any agreement to the contrary, be the first owner of the copyright therein;

(c)  in the case of a work made in the course of the author’s employment under a contract of service or apprenticeship, to which clause (a) or clause (b) does not apply, the employer shall, in the absence of any agreement to the contrary, be the first owner of the copyright therein;

......................"

Actors, which are performing in TV Serials / Movies as per their employment / service contracts with the producers of these TV Serial / Movies', NOT the first owner of copyright of 'original literary, dramatic, musical and artistic works' (and this different from having copyright in 'cinematograph film so made' as can be seen from clause (b) of Section 13 and I am referring here to what is 'copyright' as per clause (a) of Section 13) but same lies with the producers of these TV Serial / Movies. 

Hence, unless there is any agreement to the contrary, there can NOT be any supply of services by an artist by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original dramatic, musical or artistic works to a music company, producer or the like.

In other words, as these actors are NOT the first owner of copyright of 'original literary, dramatic, musical and artistic works', there can NOT transfer or permit to use or enjoyment of the copyright to anyone else. 

And hence, subject RCM provisions under discussion does NOT apply to the given situation.  

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Kindly ignore earlier post of mine. I misread relevant provision. I will come back to my views on issue under discussion afterwards. Apologies for the inconvenience caused.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

W.r.t  your outpourings  at serial no. 21, you have echoed what was actually brewing in my mind. I treat your addition as finishing touch. But for your  addition, my reply would have remained inconclusive. You have made a distinction between dramatic work and cinematograph film in a lucid style.

Thanks & regards.

[KASTURI SETHI]

In continuation of the above, another major difference between the 'dramatic work' and 'cinematographic work' is that the dramatic work is protected by the Copyright Act whereas the cinematographic work is not protected inasmuch as the term, 'ORIGINAL' is absent before cinematographic work/film (clause b of sub-section of Section 13). Therefore, Govt. has brought only those activities under RCM which are protected by the Copyright Act.

The elements of 'originality', creativity & innovation are also present in Cinematographic film/work but there is every possibility of infringement because of multiple professional activities/services being involved in producing a film.

 

[Alkesh Jani]

Shri Kasturiji Sirji,

As a learner, I wish to put the issue (GST point of view) as under:-

(i) The actor is supplier of service.

(ii) It is a taxable service

(iii) The service is to be classified under “dramatic works”.

Now coming to Sl. No. 9 of the Notification No. 13/2017

Supply of services by an author, music composer, photographer, artist or the likeby way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer or the like. ((here I am of the view that original literary is for literary only and not original dramatic, original musical, original artistic).

Here, the supplier of service is ‘Author’.

As per Section 2(d) of the Copyright Act “author” means,— (i) in relation to literary or dramatic work, the author of the work;

Recipient of Service Publisher, music company, producer or the like, located in the taxable territory

From above, the actor is the author of the performance made by him, either live or in front of camera. If there is agreement, for such performance with the producer or the like, makes the producer or the like, liable to pay GST.

Summarizing the above, I am of the view that if the actor is supplying the service, as an author, by way of transfer or permitting the use or enjoyment of a copyright, the producer of like is liable to pay GST on Reverse Charge Basis in terms of Sl. No. 9 of the Notification No. 13/2017 read with Section 9(3) of the CGST Act, 2017.

This is the best of all I have. In either case, it is open for the person to opt for advance ruling or need to wait till legal forums takes their view on the issue.

My special thanks to Shri Sadanand Bulbule ji for raising such an interesting and debatable query.

Thanks

With Due Regards

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

Now it is worthwhile to say,  "Dissent is decent".

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

An extract of your reply.

"Here I am of the view that original literary is for literary only and not original dramatic, original musical, original artistic"

While interpreting statutes, the importance of punctuation marks cannot  be brushed aside. 

[KASTURI SETHI]

The punctuation marks are pillars of a language.  The power of punctuation marks is unquestionable.

[Sadanand Bulbule]

Dear all, in continuation of my posting at Sl No. 7, please the refer the following:

Circular No. 178/10/2022-GST

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, There is no room for any doubt. You are already on right track from the first day itself i.e. your opinion expressed in the query itself.

By the time SCN is issued, you will get more sufficient legal material in favour of your client. You have tight grip on this issue.

[Padmanathan KV]

RCM entry is:

[9] Supply of services by a music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original dramatic, musical or artistic works to a music company, producer or the like.

The activity involved is an artist performing for which remuneration is paid by producer. Here the artist does not transfer or permit the use or enjoyment of a copyright. Hence, in my view, RCM is not applicable to the said transaction.

[Sadanand Bulbule]

Dear all

I am happy to inform that, based on the stunning outcome of this comprehensive discussion, one of the taxpayers was successful in convincing the Adjudicating Authority that, payment made to TV artists is not liable to tax under RCM under Entry No.9 of Notification No. 13/2017-CTR dated 28/06/2017. And the Adjudicating Authority in Bengaluru who had initiated proceedings under Section 73 for the year 2019-20 has dropped SCN on 28/08/2024 considering the merits of taxpayer's contention.

Kudos to all experts for soulful contributions. May their tribe increase.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

                       Sir,  Heartiest congratulations to you. It is a matter of immense pleasure not only for the party but  for all experts who worked hard on this issue wholeheartedly. 

                            I am also thankful to you for asking an inquisitive query. You laid the foundation for decision on merits. 

[Sadanand Bulbule]

🙏🙏 Sirji. 

[Sadanand Bulbule]

Dear all

It is disheartening to note that, despite incontrovertible statements made by the experts, the authorities are unwilling to accept the legal position on this issue for ‘‘private’ reasons. 
So I request the CBIC to issue suitable clarification to get rid of needless litigation and restore peace of mind. 

[Sadanand Bulbule]

Dear all

Despite presenting such best results arising out of experts’ valuable experience, some authorities have refused to appreciate the legal significance and fastened the tax, interest and penalty for “private” reasons. 

This is the clear abuse of adjudication power. So I appeal to the CBIC to issue suitable clarification to prevent further damage to the film/TV industry.

[Alkesh Jani]

Sir, can you please share the relevant findings of the Order and on what ground the department has filed and appeal before Appellate Authority, for the order dropping the SCN.

Thanks in Advance.

With regards.

[Sadanand Bulbule]

Dear Sir

Right now, I don’t have that order copy. I shall arrange it. Thanks for your keen interest Sir. 

[Sadanand Bulbule]

Dear Alkesh Jani Sir

I have perused the adjudication order passed under Section 74. The authority is of the view of that, there is transfer of Intellectual Property. Final excerpts of the order are as under:

A personal hearing is provided to the RTP for which Sri XXX Advocate and Sri XXX Advocate of the company appeared on xxxx on behalf of the RTP and the points of each observation are discussed with replies and recorded his averments on a separate note sheet. The order is finalized on the merits of the points of observations with reference to the replies and personal hearing. The tax liability along with interest and penalty payable is as under:

The tax is payable at the rate of 18% together with Interest at 1.5% per month and penalty is payable equivalent to tax amount as prescribed u/s.74(9) and section 122(1) of the CGST/KGST Act.

My take:

The contentions of the RTP are not examined in the right perspective. Therefore it may not stand the test of law.

 

AI Summary

Reverse charge on artist payments depends on an actual transfer or licence of copyright, not mere task-based performance.
Whether producers must pay GST under the reverse charge entry for payments to cine/TV artists turns on whether those payments constitute a supply by way of transfer or permitting the use or enjoyment of a copyright in "original literary, dramatic, musical or artistic works". Key considerations are the statutory scope of clause (a) of Section 13(1) of the Copyright Act (original works), distinctions between dramatic works and cinematograph films, contractual allocation of performer's rights, and whether performers are first owners entitled to transfer copyright-if no copyright transfer or licence exists, commentators contend RCM is not triggered.