Cinematographic film not IT software under GST: HC
A cinematographic film is not IT software under the GST law, even if delivered via a digital link or hard disk, the Bombay High Court has held while setting aside a tax demand of over Rs 79.7 crore from Karan Johar’s two production companies. The mode of delivery remains irrelevant to tax classification, a Bench of Justices M S Karnik and Sandesh Patil held in the judgment passed on September 10 in a plea filed by Johar’s Dharma Productions and Dharmatic Entertainment.
There is nothing on record to show how a cinematographic film, a passive audio-visual work, incapable of execution, manipulation or interactivity could ever satisfy the statutory definition of “information technology software”, it said.
Whether the content is transmitted physically (hard disks) or electronically, the mode of delivery cannot determine classification, the HC said, adding that there was no statutory basis to equate digital content with software.
The dispute concerned the classification of copyright licensing of films.
Tax authorities treated the transactions as licensing of IT software under Services Accounting Code (SAC) 998340, attracting 18 per cent Goods and Services Tax (GST).
The state tax department had raised a tax demand of Rs 79.7 crore for the period between the financial years 2017-18 and 2020-21, claiming that delivering film content through digital links or hard disks brought the transaction under IT software services. Dharma Productions and Dharmatic Entertainment then filed a plea in the HC to challenge the demand, arguing that they were licensing intellectual property rights in cinematographic films under SAC 997332, which attracted 12 per cent GST during the relevant period.
