TMI Blog2019 (3) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... coverage of the local actors and crew. He also takes the risk of an accident occurring during the shooting. His service is, therefore, an integral part of the activity for the production of the feature film. The service being supplied is not, therefore, classifiable as the one specified in subsections (3) to (13) of section 13 of the IGST Act, 2017. The transaction between CDIVF and the Applicant is, therefore, import of service and constitutes an inter-State supply within the meaning of section 7(4) of the IGST Act, 2017, and the Applicant is liable to pay IGST on the payments to be made to CDIVF in terms of Sl No. 1 of Notification No. 10/2017 IGST (Rate) dated 28/06/2017at 18% rate specified under Sl No. 34(vi) of Notification No. 08/2017 IT(Rate) dated 28/06/2017, as amended from time to time. Applicability of IGST - Held that:- If the Applicant modifies the contract so that CDIVF acts as pure agent for certain services in addition to the main supply of motion picture production service, the related transactions will be import of services from the actual suppliers, and the amount paid on actual cost basis for procuring those services will be subjected to IGST at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract with CDIVF (hereinafter the Contract). The Contract is for the production services . According to clause 5 of the Contract, CDIVF will facilitate the provisioning of the production services. The Applicant will reimburse CDIVF the cost of procuring these services, based on the bills raised by the service providers, bearing the name of the feature film. CDIVF will hire the local actors in Brazil and will provide insurance coverage for the crew originating and residing in Brazil. This apart, CDIVF will also hold insurance to cover all accidents and injuries during the production of the feature film in Brazil. 2.2 CDIVF will be paid USD 95,000 for his services as outlined above. CDIVF will receive 85% of the above-budgeted amount before the actual shooting begins and the balance amount at least seven days before the shooting ends. Till such final payments, CDIVF may retain as security all production rights and talent buy-outs for such production in Brazil. 2.3 The Applicant argues that CDIVF is supplying intermediary services. He facilitates between the foreign suppliers and the Applicant the supply of goods and services, namely accommodation for the crew, supply of food, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, and no tax is payable on RCM in terms of Sl No. 1 of Notification No. 10/2017 IGST (Rate) dated 28/06/2017. 3. Submissions of the Revenue 3.1 Concerned officer from the Revenue submits that at the time of signing the Contract the so-called principal suppliers of the services or the services are not clearly identified. The Question of facilitating as an intermediary between the principal suppliers and the recipient, therefore, does not arise. CDIVF is, not, therefore, acting as an intermediary. 4. Observation Findings of the Authority 4.1. The answer to the question about the liability to pay IGST on the reverse charge on the payments to be made to CDIVF depends upon the location of the recipient of the service. The Applicant, a resident of India, will receive the service in Brazil, where it has no fixed establishments or a specific location at which the service is being supplied. The location of the recipient should, therefore, be the usual place of his residence in terms of section 2(14)(d) of the IGST Act, 2017. The recipient is, therefore located in the taxable territory. Tax is, therefore, payable on RCM in terms of Sl No. 1 of Notification No. 10/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he value of the services he had procured on behalf of the Applicant, and he could not be eligible for deduction under rule 33. 4.5 The Applicant s alternative description of CDIVF as an event manager needs to be discussed in this context. Event management services (SAC 998596), as described in section 13(5) of the IGST Act, refers to admission to, or organization of a cultural, artistic, sporting, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and services ancillary to such admission or organization . Clearly, any event whatsoever does not fit the bill. It has to be an event of a nature specified above. The emergence of a CD containing footage for a motion picture is not a cultural, artistic, or entertainment or a similar event. It is merely a stage in the process of producing the feature film. Screening of the completed motion picture or, for that matter, of the footage contained in the CD, however, can fit the description of events included in section 13(5) of the IGST Act. CDIVF is not being contracted for organizing such a screening event for the Applicant. CDVIF is not, therefore, supplying services for organizing even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sical production of the film. They are called Line Producers because they cannot start work until they know what the 'line' is between the 'above-the-line' costs, which relate to writers, producers, directors and cast, and the 'below-the-line' costs which include everything else, e.g., crew salaries, equipment rentals, development costs, locations, set design and construction, insurance, etc. They are given the script and asked to assess the likely 'below the line' cost of the production which involves breaking down the screenplay into a schedule a timetable for the film shoot that shows how long it will take to shoot each scene. From this schedule, the Line Producer can accurately estimate the cost of each day's shooting and produce a provisional budget estimating the total amount of funding required. 4.9 During pre-production, Line Producers, working closely with the director, production manager, first assistant director, art director and other heads of department, prepare the production schedule and budget and set the shoot date. Line Producers oversee all other preproduction activities, including hiring the production team, setting up th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IGST Act, 2017. The transaction between CDIVF and the Applicant is, therefore, import of service and constitutes an inter-State supply within the meaning of section 7(4) of the IGST Act, 2017, and the Applicant is liable to pay IGST on the payments to be made to CDIVF in terms of Sl No. 1 of Notification No. 10/2017 IGST (Rate) dated 28/06/2017at 18% rate specified under Sl No. 34(vi) of Notification No. 08/2017 IT(Rate) dated 28/06/2017, as amended from time to time. 4.13 Finally, the Applicant s question about the applicability of IGST on the reimbursements made on the actual cost basis needs to be answered. Such costs, if any, may be eligible for deduction under rule 33(iii) of CGST Rules, 2017 from the value of supply of motion picture production service, provided CDIVF is acting as a pure agent of the Applicant. Pure agent means a person who- (a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; (b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as a pure agent of the recipient of sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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