The Bombay High Court on September 10 ruled in favor of Dharma Productions, rejecting Maharashtra GST officials’ classification of cinema as Information Technology (IT) software. The court quashed GST orders dated April 5 and 6, 2021, that sought to tax digital cinema under IT software provisions, clarifying that cinematographic films do not meet the statutory definition of IT software, according to medianama.com.
The dispute centered on whether the mode of delivery of a film—especially digital transfer—could reclassify a film copyright license as a Software-as-a-Service (SaaS) license for tax purposes. The court found no basis for this reclassification, stating that a cinematographic film is a passive audio-visual work incapable of execution, manipulation, or interactivity, and thus cannot be considered IT software under the law. The ruling overturned the GST department’s earlier orders that applied an 18% tax rate based on the IT software classification.
This decision impacts how digital cinema is taxed under India’s GST regime, which previously differentiated tax rates based on the classification of the content. Before 2021, non-IT software cinema was taxed at 12%, while IT software classification attracted an 18% tax. The ruling clarifies the tax treatment of digital films, potentially affecting other film producers and distributors who faced similar classification challenges. The case highlights ongoing legal debates over digital content taxation in India.
The Bombay High Court’s order is a significant legal precedent for the entertainment industry, confirming that digital films do not qualify as IT software for GST purposes. The court’s detailed judgment can be accessed in the order published on medianama.com, providing clarity on the tax classification of digital cinema in India.