Dharma Productions and Dharmatic Entertainment challenged GST demands totalling over ₹79.7 crore for FY 2017-18 to 2020-21, where tax authorities had classified their licensing of copyright in cinematographic films as licensing of 'information technology software' under SAC 998340, attracting 18% GST. A Division Bench of Justices M.S.
Karnik and Sandesh D. Patil held that a cinematographic film, a passive audio-visual work incapable of execution, manipulation or interactivity, cannot satisfy the statutory definition of 'information technology software' merely because it is delivered digitally, and quashed the assessment and appellate orders.
Legal Background
Under GST, the rate of tax on a supply depends on how it is classified in the rate notifications and the Scheme of Classification of Services, so a dispute over the heading under which a service falls can decide whether 18 per cent or a different rate applies. Copyright in a cinematograph film is a distinct right under the Copyright Act, 1957, which defines a cinematograph film in Section 2(f) as a work of visual recording on any medium. Classification disputes of this kind usually turn on the words of the entry or definition relied on, and not on how the content is delivered. This note summarises the reported ruling only, and the order itself should be read before relying on it.