The ministry of finance in the government of India has issued a circular dated 11th October, 2024, regularising, inter alia, payment of GST on services of film distributors or sub-distributors who act on a principal basis to acquire and distribute films:
1. Representations have been received to clarify regarding the GST liability for the period from 1-7-2017 to 1-10-2021 on transactions between distributors and exhibitors wherein the distributors grant the theatrical rights to the exhibition centres. Field formations have viewed that such transactions are classifiable under SAC 9996 and attract GST at the rate of 18%.
2. Prior to 1st October, 2021, GST at the rate of 18% was leviable on motion picture, videotape and television programme distribution services under heading 9996 whereas 12% rate of GST was leviable on “temporary or permanent transfer or permitting the use or enjoyment of intellectual property rights in respect of goods other than IT technology software” under heading 9973. It was observed that both entries apparently covered services by way of licensing of rights to broadcast or show films. This issue was discussed in the 45th GST Council meeting held on 1-9-2021 wherein the Council recommended to keep a uniform rate of 18% on both these entries with effect from 1-10-2021.
3. The GST Council in its 54th meeting held on 9th September, 2024 has recommended to regularise the payment of GST on transactions between distributors and exhibitors wherein the distributors grant the theatrical rights to the exhibition centres on ‘as is where is’ basis from 1-7-2017 to 30-9-2021.
4. Therefore, as recommended by the GST Council, the payment of GST on transactions between distributors and exhibitors wherein the distributors grant the theatrical rights to the exhibition centres is regularised for the period from
1-7-2017 to 30-9-2021 on ‘as is where is’ basis.
Clarification regarding the scope of “as is / as is, where is basis” mentioned in the GST circulars issued on the basis of recommendations of the GST Council in its meetings has also been issued.
Instances were brought to the notice of the Board pertaining to the prevailing doubts among the field formations/trade as regards the scope of regularisation on “as is” or “as is, where is basis” vide various GST circulars issued for clarification regarding applicable GST rates and appropriate classification of specified goods or services or both on the basis of recommendations of the GST Council in its various meetings.
The GST Council in its 54th meeting held on 9th September, 2024 has recommended issuance of clarification to clarify the intent behind the regularisation done in the past meetings. Therefore, another circular was ssued in exercise of powers under section 168 of CGST Act, 2017 to clarify scope of “as is” or “as is, where is basis”.
Circulars have been issued based on recommendation of the GST Council wherein GST non-payment/short-payments for past period have been regularised “as is” or “as is, where is basis” in certain cases for supply of goods or services or both. Regularisation for the past period has been done, on the recommendations of the Council, in situations where genuine doubts have arisen as there are two competing entries with different rates in the notifications, or issues have arisen due to diverse interpretation resulting in a situation where some suppliers have paid a lower rate of GST (including nil rate on account of an exemption entry) and some suppliers have paid a higher rate of GST. It has also been clarified that where tax-payers had paid at the higher GST rate, in such situations, they shall not be entitled to any refund.
The phrase ‘as is where is’ is generally used in the context of transfer of property and means that the property is being transferred in its current condition, whatever this condition happens to be and the transferee of property has accepted it with all its faults and defects, whether or not immediately apparent. In the context of GST, the phrase ‘regularised on as is where is’ basis means that the payment made at lower rate or exemption claimed by the tax-payer shall be accepted and no refund shall be made if tax has been paid at the higher rate. The intention of the Council is to regularise payment at a lower rate including nil rate due to the tax position taken by taxable person, as full discharge of tax liability. The tax position of a taxable person is reflected in the returns filed by the person where the applicable rate of tax (or relevant exemption entry) on a transaction/supply is declared.
Thus in cases where the matters have been regularised on “as is” or “as is, where is basis”, in case of two competing rates, and the GST is paid at lower of the two rates, or at nil rate where one of the competing rates was nil under notification entry, by some suppliers while other suppliers have paid at higher rate, payment at lower rate shall be treated as tax fully paid for the period that is regularised.
Illustration 1:
In a situation where certain tax-payers have paid 5% GST on supply of X while some have paid 12%, and the GST Council recommends to reduce the rate to 5% prospectively and regularise the past on “as is where is basis” which is notified on 1-12-2023, this means that for the period prior to 1-12-2023, the 5% GST paid by tax-payer will be treated as tax fully paid and they would not be required to pay duty differential of 7% between 5% and 12%. For those tax-payers who have paid 12% GST, no refund would be allowed.
Illustration 2:
In a situation where certain tax-payers have paid 5% GST on supply of X while some have paid nil duty due to the genuine doubt that there was an exemption entry for X, and the GST Council recommends to clarify that the applicable rate is 5% and to regularise the past on “as is where is basis”, in view of prevailing genuine doubts, which is notified on 1-12-2023, this means that for the period prior to 1-12-2023, non-payment of GST and declaring such transactions as exempted supply in their return by the tax-payer will be treated as full discharge of tax liability and they would not be required to pay duty differential of 5% between Nil and 5%. For those tax-payers who have paid 5%, no refund would be made.
Illustration 3:
In a situation where the interpretational issue is between 5% and 12% rates, and some tax-payers have paid 5%, others have paid 12% while certain tax-payers have not paid GST on supply of X, and the GST Council recommends to clarify that the applicable rate is 12% and regularise the past on “as is where is basis” which is notified on 1-12-2023, this means that for the period prior to 1-12-2023, the 5% GST paid by tax-payer will be treated as tax fully paid and he would not be required to pay duty differential between 5% and 12%. For those tax-payers who have paid 12%, no refund would be made. However, the regularisation would not apply to situations where no tax has been paid. In such cases, the applicable tax i.e. 12% shall be recovered.