2026-VIL-1074-BOM
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SGST High Court Cases

GST – Classification of licensing of copyright in cinematographic films - Temporary transfer of intellectual property rights in cinematographic films licensed by producer to distributors for commercial exploitation – Tax authorities classified the licensing as Information Technology Software services attracting 18% GST instead of temporary transfer of IP rights in goods other than IT software attracting 12% – Whether licensing of copyright in cinematographic films is classifiable under SAC 998340 (ITSS) at 18% GST or under SAC 997332 (licensing services for right to broadcast and show original films) at 12% GST – HELD - The licensing of copyright in cinematographic films is classifiable under SAC 997332 and attracts 12% GST, and not under IT software classification - Entry 5(c) of Schedule II to CGST Act treats temporary transfer or permitting use or enjoyment of any IPR as supply of service. A cinematographic film is a passive audio-visual work incapable of execution, manipulation or inter-activity as required by the statutory definition of information technology software, which means any representation of instructions, data, sound or image capable of being manipulated or providing interactivity by means of a computer or automatic data processing machine - The scheme of classification of services consciously creates two separate and distinct taxable entries under Heading 9973 namely SAC 997331 for computer software and SAC 997332 specifically for licensing services for right to broadcast and show original films, sound recordings and television programmes. Group 99733 separately lists these two codes demonstrating that cinematographic content licensing cannot be subsumed within software - The impugned orders suffered from manifest and unreasoned errors of law by collapsing two admittedly distinct SACs into one without independent reasoning or explaining the statutory basis. The mode of delivery whether physical hard disks or electronic transmission cannot determine classification, which must turn on essential character of supply - Administrative clarifications by Prasar Bharati and alert Circulars support SAC 997332 for licensing by original copyright holder and expressly distinguish this from distribution of films by distributors to exhibitors classifiable under SAC 999614 at 18% - CBIC circulars dated 11.10.2024 acknowledge the long-standing overlap and ambiguity in classification prior to 01.10.2021 and regularise payment on ‘as is where is’ basis thereby permitting the entire chain of exploitation from producer to distributor to exhibitor to attract uniform treatment. The classification of theatrical rights cannot change when distributor licenses exhibitor - The Revenue reliance on statement of Post-Production Head was erroneous as it was never furnished to the petitioner and spoke only of mode of transmission without technical material or executable program - The impugned orders are quashed. The writ petitions are allowedrnrn^Whether mode of delivery is relevant to classification – HELD - Whether content is transmitted physically or electronically, the mode of delivery cannot determine classification, which must turn on the essential character of the supply. Equating “digital content” with “software”, the core error underlying the impugned orders, has no statutory basis - A ground taken for the first time in the Affidavit-in-Reply by the Respondents contending that the petitioner's services fall within “Online Information Database Access and Retrieval” services whereas, neither the SCN, Orders-in-Original nor Orders-in-Appeal contains any discussion or finding on the contention that the petitioner's services fall within “OIDAR” services. It is settled law that an adjudicating/appellate order cannot be improved upon or supplemented by an affidavit before the writ court; its validity must be tested on the reasoning it actually contains – Further, the respondents’ reliance on the ‘Aspect Theory’ to treat “mode of delivery” as an independent classification criterion is misconceived - The ‘Aspect Theory’ operates in the field of legislative competence, permitting different legislatures to tax different aspects of the same transaction under distinct fields of legislation and has no application to classification on a single supply under a single statute. The dominant nature and essential character of the supply, not its mode of transmission, must govern classification.
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GST & Customs updates: Sep'26
By CA Vivek Jalan

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