The Karnataka Appellate Authority For Advance Ruling ( AAAR ) upheld the ruling of Karnataka Authority for Advance Ruling ( AAR ) holding services of distribution of rights to exhibit film by distributor to exhibitor are classifiable under motion picture distribution service.
M/S J.B.Exhibitors, the Appellant is into the Exhibition of Movies in theatres, wherein the Appellant takes the theaters on lease and operates the theaters. The Appellant collects the GST on the value of the tickets classifying the service under SAC 998554. The Appellant has the intention to diversify the business, by entering into Licensing services for the right to broadcast and show original films, sound recordings, radio and television programmes etc.
The Appellant sought from the Advance Ruling Authority, the correct classification of the Appellant’s proposed service of Licensing services for the right to broadcast and show original films, sound recordings, radio and television programmes etc. The Advance Ruling Authority, vide impugned order no. KAR ADRG 30/2023 dated 15.09.2023 has given a Ruling relating to classification of licensing services of distribution of rights to exhibit the film by the distributor to the exhibitor and classified under SAC 999614.
The Appellant has filed appeal arguing that the said ruling is totally tangential or divergent to the plea or prayer of the Appellant which related only to classification of Licensing services for the right to broadcast and show original films, sound recordings, radio and television programmes etc.
It was alleged that the AAR ruling has not been able to appreciate the two stages where classification is necessary, one being the licensing stage and the other being the Leasing stage. The distributor merely leasing only the rights to exhibit and therefore these rights are not transferred, but only given or agreed to the exhibitors to exhibit the films or programmes, which is the second stage.
The issue to be decided is whether the order passed by the Authority for Advance Ruling is just and proper under the circumstances or needs. The appellant has argued that the Authority for Advance ruling is beyond the scope of the prayer.
It was argued that the prayer in the ARA 01 was for determination of correct classification of Licensing services for the Right to Broadcast and show original Films, Sound recordings, video and television programs, etc. and whereas the ruling of the Authority for Advance ruling vide the order dated 15.09.2023 relates to the classification of the licensing services of distribution of rights to exhibit the films by the distributor to the exhibition are held classifiable under SAC 999613. It was stated that they are an exhibitor of films and intend to venture into the business of distribution of films for exhibition in theatres.
The appellate authority comprising Roopam Kapoor and Shikha C observed that despite being pointed out during the course of hearing, appellant has not brought out if he was copy right holder for the product being distributed by him.
The AAAR held that the lower Authority have discussed the issue in detail, along with provisions of SAC 997332 and 999614 and have countered the arguments put forth by the Appellant and have given a ruling that “the Classification of the Licensing Services of distribution of rights to exhibit the films by the distributor to the exhibitor are classifiable under SAC 999614”.
The AAR upheld the ruling given by the Lower Authority and dismissed the appeal.
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