Bombay High Court Quashes ₹79.7 Crore GST Demand Against Dharma Productions, Says Films Are Not IT Software
Mumbai: The Bombay High Court has held that a cinematographic film does not become “information technology software” under GST merely because it is delivered through a digital link or on a hard disk, quashing a tax demand of over Rs 79.7 crore against Dharma Productions Pvt. Ltd. and Dharmatic Entertainment Pvt. Ltd. A bench of Justices MS Karnik and Sandesh Patil passed the judgment on September…
Mumbai: The Bombay High Court has dismissed a tax demand of more than Rs 79.7 crore against Dharma Productions and Dharmatic Entertainment, ruling that a film does not qualify as "information technology software" under GST just because it is delivered digitally. The court ruled in favor of the companies' challenge to GST demands from 2017-18 to 2020-21.
The dispute centered around whether the copyright licensing of the films should be classified as information technology software under Services Accounting Code (SAC) 998340, which attracted an 18% GST rate. The companies contended that it should be classified as SAC 997332, which had a 12% GST rate prior to a revision in October 2021.
The court rejected the tax authorities' claim that the mode of delivery changed the classification of the transaction. The court emphasized that the GST definition of "information technology software" only applies to machine-readable representations of data, sound, or images capable of manipulation or interaction, which does not apply to cinematographic films.
The court rejected the notion that the delivery method, whether physical or electronic, could determine the GST classification.
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