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ASSOCHAM urges FM to frame appropriate GST laws for E&M

8th September 2010

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has urged the Finance Ministry to frame appropriate Goods & Service Tax (GST) laws & rules for entertainment & media (E&M)industry to ensure that growth in this sector is not hampered.

In a representation sent to the Finance Minister by ASSOCHAM President, Dr. Swati Piramal, it has been stated that GST should take into account overall policy of ensuring affordability of services rendered by E&M sector both through an appropriate rate of tax on services and on sale of content or music rights etc. as also resolve current problem of double taxation. This includes both VAT & Service Tax levied on the same transaction such as transfer of maximum impact would be that instead of service, transaction is classified as goods as in firstcontent.

According to ASSOCHAM, varying GST rates across goods & services will give rise to problem of classification on transfer of copyright in this sector. Hence, one of the challenges in resolving this problem under GST regime would be determination of correct classification of subject matter of levy, i.e. goods or services. In light of latest key developments on GST, since rates for goods & services are different in year 1 & 2, issue of classification will be resolved only in year 3 when there will be a convergence to a single rated GST all rates for goods & services.

The ASSOCHAM Chief further pointed out that there are many such transactions in E&M sector, where input taxes paid is not available as credit and is to be regarded as cost of transaction, because of peculiar federal structure of indirect taxes in our country. Some example are where a television channel company acquires satellite rights of a blockbuster movie from an Indian company, such rights being in nature of ‘copyright’, would attract CST or VAT.

The channel company would, generally, have output service tax liability on its broadcasting services, in which event, it would not be eligible to claim credit of CST/VAT paid so as to use against output liability. CST/VAT paid, hence, would be tax cost of transaction. Similarly, where a television channel company commissions a television programme, the producer would charge service tax for progaramme production services.

The television channel company, where it grants such programme to a DTH platform holder to exhibit it exclusively on such platform in a regional language, would attract CST/VAT. Service tax paid by a channel company on input service would not be available as credit against output CST/VAT liability. Under GST regime, cross utilization of credit across goods & services would be allowed. Therefore, VAT/CST paid would be eligible to be offset against output service tax liability and vice-versa.



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