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Controversy – Service Tax on Copyrights

July 9, 2010
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1 min read

[By Shaleen Shah (Partner), VNCA]

The Finance Act, 2010 has amongst other amendments, proposed following new service on Copyrights w.e.f. 1-Jul-2010:

The existing taxable service ‘Intellectual Property Right (IPR)’ excludes copyright from its scope. The service of transferring temporarily or permitting the use or enjoyment of Copyrights on (a) cinematographic films and (b) sound recording are now brought under the ambit of service tax. However, copyright on original literary, dramatic, musical and artistic work would continue to remain outside the scope of service tax.

News Report:

PVR Pictures, Balaji Telefilms, Yash Raj Films and UTV Motion Pictures have moved the Delhi High Court against the government’s recent decision to levy service tax on copyright services.

The Controversy:

A transaction of distribution or exhibition involving transfer of the right to use copyright attracts value-added tax (VAT).

The Government has introduced a new taxable service in Section 65(105) of the Finance Act levying service tax on transfer or allowing use of right of specified copyrights.

Treating copyright as goods as well as a service seems to be ultra vires the Constitution of India and contravenes Articles 14, 19(1)(g), 265 and 300A of the Constitution. Copyrights are intangible property and are liable to VAT. Charging service tax on the transfer of copyrights is a clear transgression of the powers of the states to levy tax on the sale and purchase of goods.

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