TaxTMI 
TaxTMI 
2023 (9) TMI 1048
X X X X Extracts X X X X
X X X X Extracts X X X X
....plicant sought advance ruling in respect of the following question:- a. Determination of correct Classification of Licensing services for the Right to Broadcast and Show Original Films, Sound Recordings, Radio and Television Programmes etc., under SAC 997332. 3. Admissibility of the Application: The advance ruling is sought by the applicant on the question, at para 2 supra, in respect of the issue of Classification of Licensing services for the Right to Broadcast and Show Original Films, Sound Recordings, Radio and Television Programmes etc., which is covered under Section 97(2)(a) under classification of any goods or services or both and hence the application is admissible under Section 97(2)(a) of the CGST Act 2017. 4. BRIEF FACTS OF THE CASE: The applicant furnishes the following facts relevant to the issue: 4.1 The Applicant is a Film Exhibitor, registered under GST. They are into the business of Exhibition of Movies in theatres by taking the theatres on lease and operating the theatre. They collect GST on tickets and discharge the same. The applicant proposed to enter into the business of Licensing services for the right to broadcast and show original films, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rocess of this assignment such assigner gives away his right to the assignee. Such an arrangement can be perpetual or for a specified period. c) The contending service classifications are 997332 and 999614. The SAC 997332 relates to license services for the right to broadcast and show original films, sound recordings, radio and television programs. The other option is merely releasing the rights to exhibit the films where the rights are not transferred by the owner but the assignee is only given the right to exhibit the films or programs the distributor still owns the rights as the transfer is by way of lease. According to our understanding the distributor is the dealer for the provision of licensing for the right to broadcast service and show original films which include sound recording. This license also includes right to re-produce, distribute and show original films etc. To the best of our understanding this licensing service is rightly classifiable under the SAC 997332 as per GST Act 2017. However, the applicant claimed that the Department is of the view that the nature of agreement between the distributor and the exhibitor would still remain a distribution service an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ervices provided by script writers, song writers and other artists. It is also commonly known as show business or show biz. g) Recreation is state of response or an activity that restores the capacity to work. Physiologically, it is a state of specific activity when the cell, having no work to perform, restores its normal composition. Regular alternation of periods of work and recreation helps strengthen the conditioned reflexes crucial to a person's behavior and work activity. Hardening of the body, physical training, sports and travel are important means of recreation. Recreation areas are used to organize optimal rest and recreation at health resort and houses of rest also helps to restore work ability. h) The classification of the services will be under the heading to that service to which they are most akin. Therefore we are of the opinion that film distribution comes under SAC 997332 since we give licence to the exhibitors to broadcast and show original films and also as our activity clearly fits into the definition. Whereas, SAC 9996 relates to "Recreational, Cultural and Sporting Services". The sub-heading relates to audio visual related services, perf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es commonly traded. l) The Courts and Tribunals in India have evolved different parameters and tests to resolve the classification disputes based on the dispute under consideration. The Supreme Court in OK Play (India) Ltd., Vs CCE [(2005) 180 ELT 300] has laid down that there is no universal test or static parameter for the correct classification of goods or services. Moreover, the HSN code, including the explanatory notes, provides guidance for the classification of an entry along with general rules of interpretation under the Customs Tariff Act (hereinafter referred to as the "CT Act"). In case of ambiguity, necessary assistance can be taken from a functional utility, design, shape and predominant usage, including name used in common parlance. The common parlance approach means that the 'word' shall be construed in the same way, which is used by the common public who uses it. Whether a particular service will fall within a particular category of tariff rate has to be decided on the tangible material or evidence to determine legislative intent while enacting it. In Gulati & Co. Vs CST [2014 14 SCC 286] the issue raised was whether Tood ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ay down fixed criteria for the same but general conclusions from above discussion can be culled out as follows:- (i) There are following tests which are commonly applied for classification of goods for the purpose of levy of tax on goods which have not been defined under the Act i.e. Common Parlance Test, Commercial Parlance Test, Commonsense Test or Commonsense rule of interpretation and user Test or Functional Test. n) In view of the aforementioned submissions it is respectfully prayed that the classification of film distribution service i.e. licencing services for the right to broadcast and show original films, sound recording under SAC 997332 is maintained and held to be correct, specific and appropriate as it is in accordance with the scheme of classification of services under GST law. PERSONAL HEARING PROCEEDINGS HELD ON 13.07.2023 5. Sri V R Balasubramani, Advocate & Authorised Representative of the applicant appeared for personal hearing proceedings and reiterated the facts narrated in their application and also furnished the written submissions. FINDINGS & DISCUSSION 6. At the outset we would like to make it clear that the provisions of CGST A....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... basis (i.e. financial leasing), cf. 997114 99733 - Licensing services for the right to use intellectual property and similar products This group includes permitting, granting or otherwise authorizing the use of intellectual property products and similar products Note: This covers rights to exploit these products, such as licensing to third parties; reproducing and publishing software, books, etc.; using patented designs in production processes to produce new goods and so on. Limited end user licences, which are sold as part of a product (e.g., packaged software, books) are not included here. This group does not include:- - licence fees as integral part of consumer goods (e.g., end-user licenses for books, records, software) - preparation, drafting and certification services concerning patents, trademarks, copyrights and other intellectual property rights, cf 998213 - legal services related to drawing up or certification of patents, trademarks, copyrights and other intellectual property rights, cf. 998213 - management services for copyrights and their revenues (except from motion pictures), cf. 998599 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and SAC 997332 deals with Licensing sendees for the right to broadcast and show original films, sound recordings, radio and television programme etc. Further, it is specified that the service falling under SAC 997332 includes licensing services for the right to reproduce, distribute or incorporate entertainment, musical such as broadcasting and showing of original films, sound recordings, radio and television programmes, prerecorded tapes and videos. 12. From the above it is observed that the service covered under SAC 997332 is for licensing the right to distribute and show original films by way of broadcasting the same. In the instant case, admittedly, licence is given by the distributor to the exhibitor for the purpose of exhibition in theatres, which means the exhibitor can only show the film by exhibiting the same in a theatre but cannot broadcast the same and show the film. At this juncture it is pertinent to mention here that term broadcast means to send out or transmit (something, such as a program) by means of radio or television or by streaming over the Internet for general public reception. The exhibitor in the instant case merely exhibits the film in a theatre but d....