Bombay HC sets aside Rs 79.7 crore GST demand against Karan Johar’s production firms

• The Bombay High Court has set aside GST demands challenged by Dharma Productions and Dharmatic Entertainment

• The dispute concerned whether licensing film copyrights attracted 12 per cent GST or the 18 per cent rate applied to IT software

• The court held that the method used to deliver a film does not determine its tax classification

The Bombay High Court has set aside a GST demand of more than Rs 79.7 crore challenged by Dharma Productions and Dharmatic Entertainment, ruling that a cinematographic film cannot be classified as information technology software merely because it is supplied through a digital link or on a hard disk.

A bench of justices M.S. Karnik and Sandesh Patil delivered the judgment on 10 September. The dispute concerned the licensing of copyright in films during the financial years 2017-18 to 2020-21. The tax amount in dispute was Rs 79,72,68,337, plus interest and penalty.

The state tax authorities had treated the transactions as licensing of IT software, taxable at 18 per cent GST. The companies argued that they were licensing intellectual property rights in films, which attracted 12 per cent GST during the period in question.

The court accepted that distinction. It found no basis to treat a film as software simply because technology was used to transfer the content. A film, it said, does not acquire the characteristics of software through its method of delivery.

The bench allowed the companies’ petitions and set aside the challenged tax orders.

With PTI inputs