Lakshmi Kumaran & Sridharan AttorneysAn ISO 9001 / 27001 certified law firm

Movie screening now fully covered under Service Tax

14th December, 2011

Watching a movie in a cinema theatre may become costlier now. As per the latest circular issued by the Central Board of Excise & Customs, the arrangements when the distributor and the exhibitor enter into revenue sharing agreement are also liable to Service Tax.

According to the circular issued on 13th December, 2011, transactions involving revenue-sharing arrangement between distributor and theatre owner will be considered as services by unincorporated entity. Service Tax will apply on these transactions also which are not on principal-to-principal basis. The CBEC, however, does not clarify as to the category under which these arrangements will be taxed.

When the theatre owner screens a movie on his own account using copyright temporarily transferred to him by the distributor, Service Tax will be payable under Copyright Service. If the movie is screened on behalf of the distributor by the movie hall, tax will be applicable under Business Support Service or Renting of Immovable Property Service. The Department also says that its earlier circular was mis-interpreted and the arrangements mentioned in the latest circular will apply to similar situations across all the services liable to Service Tax.  
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