PAYMENT TO CINE OR TV ARTISTS. LIABILITY UNDER RCM, Goods and Services Tax - GST

[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 “own creativity” 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.

Posts / Replies

[Alkesh Jani]

Shri  Sadanand Bulbule ji,

I guess the query is related to payment made to Cine /TV artist (Actor(s) or Actress).  The work of such actors may be classifiable under HSN code 999792:- Agreeing to do an act.

As per Sl.No. 78 of Notification No. 12/2017 (as amended from time to time) the exemption is available for the following only.

“Services by an artist by way of a performance in folk or classical art forms of-

(a) music, or

(b) dance, or

(c) theatre,

if the consideration charged for such performance is not more than one lakh and fifty thousand rupees:..."

Thus, from above, exemption is for folk or classical art forms of music, dance and theatre and not to Cine or TV artist.

The performance of actor (artist) is a service in terms of Schedule-II, (5)(2)(e) appended to the Act, 2017 and is also taxable service. Thus, same is covered under Sl.No. 9 of Notification No.13/2017. [Also refer Section 15(2)(c) of the CGST Act, 2017).

Pls Note. Above is only for the discussion purpose and cannot be construed as legal advice.

Thanks

[Sadanand Bulbule]

Dear Sir

Assuming that, the subject services are taxable under Sl.No. 78 of Notification No.12/2017, then what is the essential significance of conjoining the provisions of Section 13[1][a] of the Copyright Act 1957 under Sl. No. 9 of Notification No.13/2017? 

Further the lead artists whose annual turnover exceeds threshold limit, they get registered and issue tax invoices charging GST. However junior artists who get paltry remuneration on 'task based performance' are usually much below the threshold limit and they do not have any right, much less exclusive, on their own performance.

Therefore in my opinion, unless the "exclusive right of performer's performance" is registered under the Copyright Act and allowed it to be transferred or used by the recipient, the  entry No. 9 of the Notification No. 13/2017 does not into picture.

Please throw floodlight on this Sir.

[Sadanand Bulbule]

Please read as:

Assuming that subject services are taxable under Entry No. 5[2] [e] of the II Schedule.

[Sadanand Bulbule]

Dear Sri. Alkesh Sirji,

With due respect to your expressions, I wish to simplify my understanding:

Every music composer, photographer, artist or the like who is sought to be roped in by virtue of Sl. No. 9 of Notification No. 9/2017 issued under Section 9[3] of the Act must be a person who at the time the supply of service relating to original dramatic, musical, or artistic works to a music company, producer or the like should have got his/her “such works” duly registered under the Copyright Act 1957. Merely because somebody is supplying routine services not relating to original dramatic, musical, or artistic works, per se, he/she does not become responsible to be covered under Notification [supra] to qualify as taxable service on reverse charge basis in the hands of recipient of services.

On a plain reading, it is apparent that the words "original dramatic, musical, or artistic works" and the words “supply by way of transfer or permitting the usage or enjoyment of a copyright” cannot be read disjunctively and the same ought to be read conjunctively.

 Your valuable comments are highly solicited.

[Alkesh Jani]

Shri  Sadanand Bulbule ji,

For the conjoining the provisions of Section 13 of the Copyright Act, 1957 my view is expressed here by way of illustration:-

Sir,  Arthur Conan Doyle has written a novel wherein character is named as “Sherlock Holmes” is the original literary work and said novel is under the copyright, to make a film based on novel permission from the author is required, if film is made and actor is casted, the actor cannot claim or register himself under copyright act for his performance as “Sherlock Holmes”. Here actor acts as per the direction of the director and fees or renumeration paid to the actor is to be added for valuation purpose, reason is the producer is making the film for commercial purpose.  So, in order to align with the provisions of GST Act and for clarity purpose same is incorporated in the Notification No. 13/2017.

Further, earlier in the film industry, artists were on salary basis, now-a-day on contract basis, therefore, one need to go through contract. The act or performance made by an artist is agreeing to an act and after availing different services and /or goods, film is made and is also registered under copyright act (one need to refer to contract) thus, it is under the RCM. The artist who are registered under GST will raise the Invoice and same is input service for the director/ producer.

The exclusive right of performer's performance" is registered under the Copyright Act (as a whole film or TV serial) and the actor has to allowed it to be transferred or used by the recipient (i.e. Director/Producer).

Sir, I am do not claim myself as expert, as I am in learning process, according to me for arriving at any conclusion one need to answer following queries:-

(i) The activity in question is within the ambit of “Supply”?

(ii) If the activity is within the ambit of supply, then said activity is supply of goods and/or services?

(iii) If the said activity is supply of service, the service is taxable or exempted, if exempted, under which authority?

(iv) Any person claiming the benefit of exemption, the onus is on the person to prove his/her eligibility for the exemption (if conditions are mentioned). Here the activity undertaken by artist has to prove that he / she is eligible for exemption.

(v) Who is liable to pay tax, supplier or recipient?

Thanks.

[Sadanand Bulbule]

Sirji

So kind of you for your generous illustrations followed by supplementary questions. I am just a beginner in this academic profession Sir.

[Sadanand Bulbule]

Dear all

With exchange of thoughts, I am of the opinion that entry No.5[2][e] to II Schedule, agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act  is hardly relevant here.

I invite other experts also to join academic discussion so that it can lead to "organic analysis" in the larger interest of all stakeholders.

I wish to realize "whole truth of the issue" and to be on that side. Nothing more than that.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

"Essentially such artists do not have their “own creativity” 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.".

Sir, w.r.t. above, my humble observation is that here copyright does not deal with 'originality of idea' but 'originality of expression' of that idea.

Hence we need to penetrate into the meaning and scope of the terms 'original' 'copyright' and 'artistic works'. The term, 'creativity' has wider scope. Its existence is not ruled out. The meaning and essence of these three terms have to be x-rayed before arriving at concrete decision.

Sir, just sharing with you for enrichment of my knowledge.

[Sadanand Bulbule]

Dear Sethi Sirji

While welcoming to the on-going discussion, I wish to reproduce the extracted definition portion of the Copyright Act 1957 with reference to entry No. 9 of Notification No.13/2017 issued under Section 9[3] of the CGST Act:

A] "work" means any of the following works, namely:-

(i)  literary, dramatic, musical or artistic works

(iii) in relation to a literary or dramatic work, any abridgement of the work or any version of the work in which the story or action is conveyed wholly or mainly by means of pictures in a form suitable for reproduction in a book, or in a newspaper, magazine or similar periodical;

(c) "artistic work" means-

(i) a painting, a sculpture, a drawing (including a diagram, map, chart or plan), an engraving or a photograph, whether or not any such work possesses artistic quality;

(ii) work of architecture; and

(iii) any other work of artistic craftsmanship

(p) "musical work" means a work consisting of music and includes any graphical notation of such work but does not include any words or any action intended to be sung, spoken or performed with the music;

B] As regards to the meaning of “Original works/Copyright”, Section 14 of the Copyright Act reads as under:

14. Meaning of copyright.-For the purposes of this Act, "copyright" means the “exclusive right” subject to the provisions of this Act, to do or authorise the doing of any of the following acts in respect of a work or any substantial part thereof, namely:-

(a) in the case of a literary, dramatic or musical work

[Note: The list is long. For brevity, only above is referred here]

C] Coming back to the issue on hand, I try to simply that works relating to literary, dramatic, musical and artistic works of the authors who have exclusive rights in terms of Section 14 are to be treated as “original works”. And the recipient of services to use such literary, dramatic, musical and artistic works from the authors holding copyrights is covered under Sl. No. 9 of the Notification No. 13/2017 on RMC basis.

D] Effectively what is included in Sl No. 9 [supra] is the “artistic works” as defined under the Copyright Act 1957 and not the work/performance of artists.

This forum  is open for further deliberations.

[KASTURI SETHI]

Sh. Sadanand Bulbule Ji,

"D] Effectively what is included in Sl No. 9 [supra] is the “artistic works” as defined under the Copyright Act 1957 and not the work/performance of artists. "

(i) Sir, First of all I agree with your above interpretation as well as opinion regarding the world of difference between both above terms. An art is entirely different from the artistic works. For example ; acting is an art but it is not artistic work.

(ii) Only clause (a) of sub-Section (1) of Section 13 of the Copyright Act, 1957 has been borrowed in GST Acts and hence only clause (a) is part of RCM Notification No. 13/17-CT (R) dated 28.6.2017 as amended vide Notification No. 22/19-CT(R) dated 30.09.19 and NOT clause (b) & (c) of Section 13 (1) ibid. On this very ground RCM is not applicable to the given situation.

(iii) The role played by an actor (on the basis of his/her talent of acting) in TV serials and films for which they get remuneration from the producer is not included in clause (a) of sub-section (1) of Section 13 of the Copyright Act. Rather, their acting/role is covered in the category of 'Cinematograph Films' defined under Section 2 (f) of the Copyright Act which is extracted below :

"cinematograph film" means any work of visual recording and includes a sound recording accompanying such visual recording and "cinematograph" shall be construed as including any work produced by any process analogous to cinematography including video films;"

(iv) Here it is pertinent to explain the meaning of the term, 'copyright'. Copyright means to allow someone the right to copy but an actor does not allow and cannot allow the right to copy, rather, he/she himself /herself expresses through art of acting in a film or TV serial. The talent /art of acting is not protected by Copyright Act inasmuch as the word, 'original' is not pre-fixed to clauses (b) & (c) as pre-fixed to clause (a) of sub-section (1) of Section 13 of the Copyright Act. Film art is an independent form of expression.

In view of the above, I am of the view that RCM is not applicable.

Sir, Can you post the major contents of the SCN, if issued ?

[KASTURI SETHI]

Dear Sir,

In continuation of my above reply,  the absence of the word, 'original' before  (b) & (c) of sub-Section 1 of Section 13 denotes that copyright is not protected but still-'originality', creativity and novelty exist. This is as per Copyright Act.

Original means which is not fake, or which is not imitation or a copy of some other work

The art of acting displayed by an actor in a film or TV serial  cannot be copied or imitated by  another person, if so done, that will not be called 'original'. What I want to say an actor does not give  his copyright .to the producer of a film but gets remuneration for the role played by the actor by virtue his talent and not because of giving right to copy. The acting talent is intellectual property of the actor which is expressed by himself/herself in a film or TV serial. Hence no question of applicability of RCM. 

[Sadanand Bulbule]

Dear Sri. Sethi Sirji

My sincere thanks for your simplified and emphatic validation of the topic under discussion and thereby liberating the confused minds of authorities. Barren interpretation is illusory and it doesn’t give birth to any potential solution. Let the law rule the adjudication instead of weaving web for itself. That’s the context here.

GST Law is not like cotton which keeps no shape and offers no resistance and can be twisted forward and backward and into pretzel. It is not malleable like sponge. It is has definite purpose, fixed shape, size and limit as well.  

It is thoughtfully conceptualised, magnificently drafted, meaningfully defined and consciously legislated on the foundation of Indian Constitution. So it needs to be understood, interpreted and enforced the way it is intended by the lawmakers. For that matter, any law is sacred, strong, stable and comfortable with itself. So there is no need to manoeuvre it this way or that way.

Your matured and consistent thoughts have demonstrated the essence of interpretation beaconing hope to the innocent taxpayers in the midst of their frustration. 

My kind appreciation to you and also to Sri. Alkesh Jani ji for deep efforts on this issue.

SCN is not yet issued sir.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, Since SCN has not been issued, it implies that you are pro-active. Raring to go. You always follow the proverbial truth that is "Nip the evil in the bud". It looks nice. Such aptitude and such attitude always yield positive results. I hope that you will get poetic justice for your client without being dragged into litigation.

I am really  indebted to you for your morale boosting language for me.

[Alkesh Jani]

Shri Sadanand Bulbule Ji,

Your word of thanks is truly appreciated! It's a pleasure to be part of this discussion. According to me there are some more aspects which can be discussed. Let us leave it to the legal forum.

Thanks

With Regards

[Sadanand Bulbule]

Dear Sri. Alkesh ji

This is not the end. The forum is open for exchange of thoughts and our endeavour is the same, to reach the full truth. Nothing more or less than that. Keep discussing.

Profound regards

[Alkesh Jani]

Shri  Sadanand Bulbule ji,

Thanks for re-starting the discussion.

The Sl.No. 9 of the Notification No.13/2017 reads as follows:-

"Category of supply of service:-

Supply of services:- by an author, 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 literary, dramatic, musical or artistic works to a publisher, music company, producer or the like.

Supplier of Service :- Author or music composer, photographer, artist, or the like

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

The clause (a) of the sub-section 13 of Copyright Act, is follows:-

"13. 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";

The dramatic work as defined at Section 2(h) of the Copyright Act is given below:-

"(h) “dramatic work” includes any piece for recitation, choreographic work or entertainment in dumb show, the scenic arrangement or acting, form of which is fixed in writing or otherwise but does not include a cinematograph film;"

As the Acting is done by the actor (performer) the definition is given below:-

" (q) “performance”, in relation to performer’s right, means any visual or acoustic presentation made live by one or more performers;

(qq) “performer” includes an actor, singer, musician, dancer, acrobat, juggler, conjurer, snake charmer, a person delivering a lecture or any other person who makes a performance;"

The sub-section (2) of Section 38A of the Copyright Act reads as under:-

"(2) Once a performer has, by written agreement, consented to the incorporation of his performance in a cinematograph film he shall not, in the absence of any contract to the contrary, object to the enjoyment by the producer of the film of the performer’s right in the same film:"

From above, it is clear that the acting is dramatic work, within the ambit of Sl. No. 09 of the Notification No.13/2017 and actors (performer’s rights for Cinematograph / TV shows, is with the producer, under the written agreement. As performer’s performance right are purchased  the Producer from the performer, he becomes liable to pay GST on the said amount. Again going through Sl.No.09 column No.3 liability to pay tax (here threshold limit is not taken for discussion) is on artist but in terms of Section 9(3) of CGST Act, the liability is casted on the producer or like.

As per the Explanatory notes, the supply of service is required to be classify under HSN code 999631 Services of performing artists including actors, readers, musicians, singers, dancers, TV personalities, independent models etc.

This service code includes:

i. services of actors, readers, singers, musicians, dancers, stunt people, television personality hosts/presenters and other performing artists; services of independent models.

Thus, as per Section 9(3) of CGST category of service for which  the liability is on the Recipient of  service i.e. producer or like (regardless of threshold limit).

Dear Experts please correct me if I am mistaken or have taken wrong perspective.

Thanks.

Pls. Note:- As I find it pertinent, the definitions are reproduced making the reply longer.

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

Is there no difference between a drama and a film ? 

[Alkesh Jani]

Shri Kasturiji Sir,

For purpose of GST, the activity  is supply of service (it is for drama or film or any other media). Exemption, available if any,  is another point of discussion.

Thanks 

With Due Regards

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

My purpose is to enrich my knowledge by way of exchange of views with experts. Thus we reinforce each other. After going through your views, I opine as under :-

(i) Whether acting (role played in a film or drama) is supply of service or not ; and whether exemption is available or not ; both issues are not involved here.

(ii) The role played by an actor whether in a film or drama qualifies as supply of service in GST Acts. Thus the supply of service is not in dispute.

(iii) . The issue involved is whether RCM is applicable on the amount (remuneration) paid by the Producer to the artists who play role in a film or TV serial.

(iv) In my view, the role played by the actors are covered under the category of 'Cinematograph film' and cinematograph film has not been brought into RCM inasmuch as clause (b) of sub-section (1) of Section 13 of the Copyright Act does not find place in RCM Notification No. 13/17-CT(R) dated 28.06.17 as amended vide Notification No. 22/19-CT(R) dated 30.9.19 (effective from 1.10.19). Only clause (a) of sub-section (1) of section 13 of the Copyright Act has been brought into RCM net. Thus the activities falling under clauses (b) and (c) of sub-section 1 of Section 13 of Copyright Act are out of RCM Notifications. Hence RCM is not applicable to the producer of a film for receiving service (acting/performance) from an actor.

(v) Since the Govt. has brought the Copyright Act into RCM under GST Acts, so we are to follow the definition and scope of 'Dramatic Work' as defined in the Copyright Section 2 (h) is extracted below :-

"dramatic work" includes any piece of recitation, choreographic work or entertainment in dumb show, the scenic arrangement or acting, form of which is fixed in writing or otherwise but does not include a cinematograph film ;

In view of the word, ‘includes’, mentioned above, it is expedient and necessary to penetrate into the literal meaning, essence and scope of the following terms used in Section 13 of the Copyright Act.:-

(i) What is 'drama ?

(ii) What is 'work' here ?

(iii) What is 'dramatic work' ?

(iv) What is 'cinema' ?

(v) What is 'Cinematograph'

(vi) What is a ' film ' ?

(vii) What is 'cinematograph film' ?

(viii) What is the meaning of 'producer' here and what are his responsibilities and functions ?

After going through the meaning and essence of above terms (easily available on google) as well as in the Copyright Act, I am of the view that there is a great gulf between 'dramatic work' and 'cinematograph film'. Characteristics of both are entirely different. Latter talks of performance by an actor in the motion pictures (movie) whereas the former talks of performance by an actor in a theatre physically before the audience. This is only one major difference between the two. There are so many other vital difference between both terms.

Thus I stick to my view that RCM is not applicable to the recipient of service (producer) of a film in the given situation in the query. I welcome to the contrary views.

Disclaimer : These are my personal views for the education purpose and not meant for any court proceedings.

[KASTURI SETHI]

In continuation to above, dramatic work is for the film and NOT  a film.

[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.