Quick Summary
The Bombay High Court has delivered a significant ruling on theGST classification of cinematographic films, providing relief to film production companies Dharma Productions Pvt. Ltd. and Dharmatic Entertainment Pvt. Ltd. The Court has quashed a GST demand of around Rs 79.73 crore, holding that a cinematographic film cannot be treated as Information Technology (IT) software simply because it is supplied or transferred in a digital format. The ruling could have wider implications for the Indian
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FAQ :
The dispute involved a GST demand of around £79.73 crore raised against Dharma Productions and Dharmatic Entertainment for the financial years 2017-18 to 2020-21. Tax authorities classified the licensing of film copyrights as IT software, levying GST at 18%.
The Bombay High Court quashed the GST demand orders, ruling that cinematographic films cannot be treated as IT software simply because they are supplied or transferred in a digital format.
The tax authorities argued that films could be classified as IT software because they were supplied through digital links or stored on electronic devices.
The court examined the essential nature of a cinematographic film as an audio-visual work, regardless of its electronic delivery method. It concluded that a digital format does not transform a film into computer software.
The ruling provides clarity for film producers, distributors, and copyright holders, especially concerning GST classification for digital distribution, copyright licensing, and OTT platforms. It distinguishes between digital content and IT software.
The ruling does not state films are exempt from GST. Instead, it clarifies that they should not be classified under the IT software category for GST purposes, implying they should be assessed under the appropriate classification for cinematographic films or related rights.
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