The Karnataka Authority for Advance Ruling (AAR) has ruled that distributor’s licensing services for the distribution of exhibitor’s rights to view films shall attract an 18% Goods and Service Tax. The applicant, Nagaraja Jayanna, is a Film Exhibitor registered under GST. They operate theaters by leasing them, collect GST on tickets, and sought to enter the licensing services business for broadcasting original films, sound recordings, radio, and television programs.
The applicant sought an advance ruling for the correct classification of licensing services for the right to broadcast and show original films, sound recordings, radio, and television programs.
The applicant argued that the department incorrectly considered the nature of the agreement as a distribution service, emphasizing that classification depends on the nature of the agreement and the rights involved, not just the manner of determining consideration.
The department’s attempt to classify the distribution service under SAC 999614 was deemed incorrect, and the correct classification of SIM distribution service under SAC 997332 was maintained.
During the proceedings, the authority held that the service of film distribution falls under SAC 999614. The applicant’s reliance on certain case laws related to goods classification was deemed inapplicable.
After reviewing submissions and provisions, the two-member bench of the Authority of Advance Ruling, Dr. M.P. Ravi Prasad (Member – State), and Kiran Reddy T (Member – Central), determined that the classification of licensing services for the distribution of rights to exhibit films is under SAC 999614 and shall attract an 18% Goods and Service Tax.
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