The licensing of copyright in a film by its producer or original copyright holder is not information technology software under the Goods and Services Tax (GST) Act, whether delivered via a digital link or a hard disk. Stating this, the Bombay high court set aside a GST demand of around Rs. 80 crore plus interest and penalty imposed on Karan Johar’s production company.
Karan had argued that the films were ‘goods’ which attracted less GST than IT software. Justices M.S. Karnik and Sandesh Patil in a September 10 order, made available only last week, held that equating ‘digital content’ with ‘software’, the core error underlying the impugned orders, had no statutory basis.
Johar’s Dharma Productions, which last year petitioned the HC to challenge the demand, said that in a few cases, it had transferred the films electronically while the others were sent on hard disks. Karan Johar’s counsel, Darius Shroff, added that no software was supplied to the distributor in the course of such transfer.
The court ruled, “Whether content is transmitted physically (encrypted hard disks) or electronically, the mode of delivery cannot determine classification, which must turn on the essential character of the supply.” Four orders of the deputy commissioner of GST, passed in 2021, were under challenge by Johar. They were set aside.
The HC stressed that there was no difference between a licence given by the licence holder to the distributor, and a licence given by the distributor to the exhibitor. The distinction sought to be raised by the adjudicating authority, added the court, was, therefore, flawed.
