The makes of the controversial movie 'Mersal' have not very sbutly criticised the new indirect tax enough to invite the wrath of certain BJP leaders who wanted the movie to be banned. Ironically, it was this demand that brought the movie into the limelight. Tamil superstar Vijay is not the only person to question GST and its implementation.
Entertainment Industry Owners
Like the end consumers, even the entertainment industry will see a varied impact of GST implementation. Movie theaters and amusement parks may see either a positive or a negative impact depending on the state they are in. The compliance has definitely multiplied for those involved in the moving making process.
1) Film Producers:
- Sale of Rights (Perpetual) – 12%
- Non perpetual theatrical rights – 12%
- Non perpetual satellite rights – 12%
- Non perpetual Music rights – 12%
- In-film placement – 18%
2) Film Distributors:
- Lease to exhibitors and theatres – 12%
- Theatres – 28% + Local levy
3) TV and Radio channels:
- Lease of programs – 12%
- Artists, Technicians and Directors – 18%
- Amusement Parks – 28%
- Entertainment Events – 28%
- Sports events like IPL – 28%
- Circus, Concerts of classical dance as well as folk dance, theatrical performance and drama - 18% (exemption up to consideration for admission of Rs. 250 per person)
- Cable TV or DTH Services – 18%
4) Television and other content Producers:
- Outright Sale – 12%
- Print Media – 5%
- Renting of hoardings – 28%
- Subscription Revenue – 12%
Availability of ITC:
ITC will now be available on the services component of activities like catering, renting of premises for movie halls, security costs which were not available under the pre-GST regime. So, the input GST paid when renting a premise can be adjusted with the output GST from selling tickets.
Exit of Entertainment Tax:
With the advent of GST, all previous indirect tax laws have been shown the door. Service Tax, VAT, SAD, CVD, et al have been subsumed under GST. Therefore Entertainment Tax cannot be levied anymore. Under the VAT system, the Entertainment tax ranged from 0% to 110% with the average tax being 30%. That is a lot of tax to be paid for a two hour movie.
Power provided to Municipality to tax on entertainment and amusement:
Under GST, local governments have been authorized to levy and collect taxes on entertainment and amusement. Such a 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 on film tickets which has made the tax burden heavier than before. Film distributors and theatre owners are on a strike to oppose this levy as it kind of beats the concept of One Nation One Tax.
Theatrical rights of films taxable:
The theatrical rights of films were not liable for VAT or Service Tax. Now with GST, sale or lease of all the rights will attract GST. The tax burden will increase in this aspect. 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. Food, beverages, etc., which form a major part of the production cost will not be entitled to ITC due to specific provisions.
Lapse of Cenvat Credit:
In case of a film producer or a television content producer, GST rate has been decided at 12%. The services provided by artists, technicians and other persons and rentals paid form a major portion of input in a film or a TV. These attract 18% GST. Major inputs are taxed at 18% GST but the output is charged at 12%.
Therefore, ITC paid will remain unutilized and may have to be written off. In case of TV series, ITC may remain unutilized.
In the entertainment industry, a large section of service providers and even suppliers are small suppliers or service providers who are may not be registered under GST. Purchases from them will attract GST which shall have to be paid by the purchaser. The compliance cost as well as the basic cost of input will increase as GST compliant invoices have to be generated.
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 date 28th June. The Reverse Charge Mechanism has been deferred until March 2018.
Impact on Event Organizers:
Compulsory GST registration of Event Organizers selling tickets online:
Since E-Commerce Operators are required to collect TCS from the sellers on their platforms, any Event Organizer that sells tickets online will have to obtain a registration under GST – irrespective of their turnover. TCS will be collected on the base value of the supply which is equal to the cost of the ticket minus the GST applicable. This shall be paid to the government by the 10th of the succeeding month. GST is applicable at the rate of 2%. Event Organizers can claim credit of TCS against the output GST liability.
Responsibility of an event organizer selling tickets online:
1) An Event Organizer needs to register and provide the GSTIN to the online platform where you are selling tickets.
2) Before listing an event on any platform, the Event Organizer must provide a billing address for the event and location of the event in order to enable the E-Commerce operator to collect appropriate TCS and comply with GST Provisions
It is imperative that professionals involved in the making of a film or a series get registered under GST. GST helps the producers who can claim input tax exemption for the money they invest on a film. In case of loss, they can claim full input exemption. At least 10% of the paid professionals are placed in the above Rs. 20 lakh categor. If everyone from the director, actors and costume suppliers pay GST, the producer’s burden is reduced. Even if the film does not make a single penny, the producer can still claim the GST paid by them.