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The Indian Media and Entertainment (M&E) industry is a sunrise sector for the economy and is making high growth strides. Proving its resilience to the world, the Indian M&E industry is on the cusp of a strong phase of growth, backed by rising consumer demand and improving advertising revenues. India is one of the highest spending and fastest growing advertising market globally. The industry has been largely driven by increasing digitalization and higher internet usage over the last decade. Internet has almost become a mainstream media for entertainment for most of the people. While the growth track is impressive, a number of challenges are posed by the industry. The implementation of GST impacts on the sector and its verticals like broadcasting, print, television, digital etc.

This article analyses the impact of GST on Media and entertainment Industry.

Market size

The Indian media & entertainment sector is expected to grow at a Compound Annual Growth Rate (CAGR) of 14.3 per cent to touch Rs 2.26 trillion (US$ 33.9 billion) by 2020, while revenues from advertising is expected to grow at 15.9 per cent to Rs 99,400 crores (US$ 14.91 billion). In 2015, the M&E sector grew at 12.8%, while overall advertising grew at 14.7% over 2014. Growth for television advertising is projected at a CAGR of 15% between 2015 and 2020, while print media is expected to grow at 8.6%, according to a report by consulting firm KPMG and lobby group FICCI (Federation of Indian Chambers of Commerce and Industry).

Market Size Of M&E Industry In India:

Bird eye of GST Rates in entertainment Industry



1. Film Producer


Sale of rights (Perpetual)


Non perpetual theatrical rights - Domestic


Non perpetual satellite rights


Non perpetual – Music Rights


In-film placement


2. Film Distributors


Lease to exhibitors and theatres



28% + Local Levy

3. TV and radio channels


Lease of programmes


Artists, Technicians and Directors


Amusement Parks


Entertainment events


Sports events like IPL


Circus, Concerts of classical dance as well as folk dance, theatrical performance and drama

18% (exemption upto consideration for admission of Rs.250/-per person)

Cable TV or DTH Services


4. Television and other content Producers


Outright Sale


Print Media

5 %

Renting of hoardings


Subscription Revenue


There were certain issues of the entertainment industry before and after the advent of GST. Some of them were as follows:-


Clarity on Lease of Film/television content rights

In the case of a certain lease of film/television content rights, there was a controversy as to whether the transactions were that of a sale of goods or providing services. If the transactions were considered as a sale of goods then VAT would be applicable else, Service Tax would have been applicable by considering under the ambit of service. Therefore, the transactions triggered turf war between the two Acts. As a result, in many cases, the transactions were made liable to VAT as well as Service Tax, thereby increasing the burden of taxes. In the state of Maharashtra, such burden was at 21% (15% Service Tax and 6% VAT).

Now with the advent of GST, the transactions will be regarded as a supply of services, which will attract a rate of 12% as applicable to temporary or permanent transfer or permit the use or enjoyment of copy rights.

Entertainment Tax Subsumed in GST

Before GST regime, the tickets of films used to attract Entertainment Tax based on the State laws. There was no set off provided for the Entertainment Tax against Service Tax or VAT paid by the distributor and so the levies were cumulative. The ultimate customer used to bear the burden of taxes. With the introduction of GST, the entertainment tax levied by the State Government is subsumed , making consolidated tax rate.

Input Tax credit for Distributors

In a case of film distributors, they will be able to take benefit of ITC of GST paid by producers and similarly, the theatre owners will be able to take ITC of GST paid by the distributors. The rate of tax payable by the ultimate customers of the industry, being 28% on the tickets purchased, the ITC is likely to be fully absorbed.

Elimination of dual tax

Another advantage of GST will be the elimination of dual tax levies of service tax and VAT on various transactions that occur.


Multiple registrations

Multiple registrations also complicate the transfer of services among offices of the same company.

Example: Imagine a company headquartered in Mumbai releases an ad that ENIL carries across its 22 stations across India. In the pre- GST era, ENIL would have raised one bill from Mumbai – the city where ENIL is headquartered. However, now each station will raise a bill on the Mumbai office, which, in turn, will raise one on the client.

This creates more than just procedural issues. If the ad was worth Rs 1 crore, how much was apportioned to each station was a matter of internal accounting before GST. Now the tax authorities could potentially question why Chennai or Delhi has billed, say, only Rs 10 lakh.

Typically, apportioning is done based on estimates of market size, impact, play-out time and a whole host of variables that the taxman is not aware of. This could potentially lead to unnecessary litigation.

Power provided to Municipality to Tax on entertainment and amusement

Under GST regime, an authority is given to a Panchayat /Municipality /Regional council/ District councils to levy and collect taxes on entertainment and amusement. This appears to be a backdoor entry of entertainment tax.

As of now, such taxes are levied only in a few States. Considering the fact that most of the States are keen on augmenting their resources to cover up their budgetary deficit, many of the States are likely to follow the suit. If that happens, the likely gains, which the industry may make by GST, will be easily wiped out and the industry may struggle under the heavy burden of a tax.

Such tax is not entitled to get adjusted against GST paid and that can become an additional levy. The State of Tamil Nadu has levied such tax @ 30% on film tickets, which resulted in a strike by the film distributors and the theatre owners as the tax burden becomes heavier than before.

Theatrical rights of films taxable under GST

The theatrical rights of films were not liable for VAT or Service Tax. Now with GST triggering in, sale or lease of all the rights will attract GST. To that extent, the burden on the industry will increase.

The level of credit will depend on the inputs of goods and services used by the producers and whether they are being acquired from the registered dealer.

Certain costs which constitute a major element of cost for production of films and television content such as food, beverages, outdoor catering, vehicle hire etc. will not be entitled to ITC due to specific provisions.

Lapse of Cenvat Credit

One more important issue is that in a case of a film producer or a television content producer, GST rate applicable for films or television content is 12%. The major portion of input in a film or a TV serial is services given by artists, technicians and other persons and various rentals paid which attract 18% GST. So major inputs are received with 18% GST credit but the output is charged at 12% GST rate.

In a case of many films, which do not fair well or could not be exploited to the extent of a breakeven level, Input Tax Credit of GST paid will remain unutilized and may have to be written off. Similarly, in a case of TV serials, which cannot be sold at a remunerative price, ITC may remain unutilized. To that extent, the profitability of the industry may get hampered though a preferential GST rate of 12% has been notified.

High Taxes on amusement and entertainment parks

A major cause of concern for various amusement and entertainment parks is that the rate applicable to them has been notified at 28%. This rate is quite stiff and it equates to the rate applicable to the services offered by casinos, race courses etc. It may not be appropriate to consider the entertainment parks, where generally a family goes for entertainment; with casinos, race courses etc.

Non Availability of Cenvat Credit

The production of feature films and TV serials entails shooting for late hours and at various locations. It is a common practice in the industry to serve food and beverages to staff and others present, give outdoor catering services at various shooting locations and provide a mode of conveyance. These expenses constitute the substantial cost of production but GST paid on the same will not be allowed as ITC.

States not entitled to grant tax exemption Status

It has been a practice of many States to give an exemption for regional films as well as films spreading positive messages to Society to give relief of entertainment tax or to grant an exemption for a period. This power of the State will get abolished as GST will be levied and the State may not be able to tamper with to give relief to such films.

Reverse Charge

The reverse charge mechanism, as was applicable in Service Tax, is also applicable to GST. In such scenario, the recipient of service pays the tax instead of the supplier. The scope of reverse charge mechanism has been expanded in GST as compared to Service Tax.

GST will have to be paid by the registered person consuming the goods or services. In the entertainment industry, a large section of service providers and even suppliers are small suppliers or service providers. Purchases from them will attract GST in hands of the entity, who is registered and using the goods/services. Apart from paying the tax, the compliance level will be substantial due to the preparation of invoices required to be done. It is bound to increase the compliance cost as well as the basic cost of input.

As the recipients of services have to take goods/services from suppliers in small locations, especially when they go for outdoor shooting, the compliance needs, as well as cost, may increase.

Supplier of services by an author, music composer, photographer, artist or like by way of transfer or permitting the use of enjoyment of copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 have been now made subject to reverse charge by Notification dated 28th June, 2017.


The GST bill may prove to be a boon for media sourcing chains which currently deals with different tax processes in different states. This indicates that tax cost will reduce and profits will increase. Overall, upcoming GST will anyhow push the platform of digital media to an upper level. 

GST appears to be a positive legislation for the entertainment industry in general. The impact of GST hinges on its smooth implementation, abstinence of further taxing by State Government and local authorities to increase the burden on business as well as consumers.

The author is a Lawyer and Company Secretary by profession. He is presently working on SAAS Cloud Startup Firmsap (Compliance through Technology) and Linking Tribes (Consulting and Media Firm) and can also be contacted at karan.sahi619@gmail.com


Published by

Karan Sahi
(Founder of Linking Tribes)
Category GST   Report

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