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Copyright content to pinch pockets of FM, TV channels

March 05, 2010 11:31 IST
Entertainment content (movie and music) will be 10-15 per cent more expensive, following the proposals of the Finance Bill 2010.

According to the Bill, service tax will be levied on any "temporary transfer of copyright or permitting the use or enjoyment of, any copyright defined in the Copyright Act, 1957 except the following: original literary, dramatic, musical and artistic works [Section 13(a) of the Copyright Act, 1957]."

Said Ranjeet Mahtani, associate partner, Economic Laws Practice, a Mumbai-based law firm, the proposal simply means, "A song writer, a composer or a film maker will not have to pay service tax, if he himself exploits the creation commercially. However, if he sells the copyright of the creation to a producer or a music company, service tax will be levied as and when they use the movie or music for commercial gains."

The move, according to ELP, specifically seems to be aimed at bringing the entertainment industry within the purview of service tax.

After implementation of the Finance Bill, experts say, radio stations and TV channels will have to bear service tax for broadcasting and telecasting music and films.

"Producers will have to pay service tax for letting TV channels broadcast their movies, and radio stations will also have to pay for playing copyright music," said Supriya Jain, senior manager, indirect tax division, KPMG. Therefore, a producer will pass on the service tax on the royalties paid to him by a TV channel and the channel will try to make good of the loss in taxes from advertisers.

Savio D'Souza, general secretary of Indian Music Industry, said, "With the new tax structure, content would become 10-15 per cent more expensive for all stake holders, from producers to radio stations to even direct-to-home players who play on-demand content. In turn, they will pass it on to their advertisers and to the end-consumers as well. Music content is already expensive and a further revision in prices may see piracy increasing more than the current levels."

For FM radio stations, who are already in the 10.2 per cent service tax purview, would have to pay around 2 per cent more for playing the same content.

Neeraj Chaturvedi, national marketing head, Fever FM, said, "Content could get more expensive now because producers too would have to pay taxes. Currently, we pay around Rs 1400 per hour of music. We pay to Phonographic Performance Ltd and Indian Performing Rights Society and in turn, the money goes to the artists whose content we play. For radio stations, like ourselves, it would not have much of an impact because we will pass it on to advertisers."

Apurva Purohit, CEO, Radio City, said, "Clarity on this clause has not yet come from the government and so we are still waiting."

Direct-to-home service providers will come under the service tax net for the pay-per-view service they provide, tax experts said. They will have to pay service tax for airing on-demand movies for which a customer makes a payment. On whether the tax will be passed on the end user, Dish TV's chief operating officer Salil Kapoor said, "We will evaluate it. When the proposal is implemented, we will look at it and take adequate steps."

Use or transfer of copyright was earlier excluded from the purview of the taxable service of Intellectual Property Services. ELP says that the proposal in Finance Bill 2010 would also open up the contentious issue of dual taxation since transfer of right to use copyright is also liable to VAT.

Pradipta Mukherjee & Swarup Chakraborty Kolkata/Mumbai
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