Film Copyright Licensing under GST Is Not ‘Information Technology Software’: Bombay High Court Quashes Demand on Dharma Productions

1. Background and Core Issue

The Bombay High Court, in Dharma Productions Pvt. Ltd. Vs State of Maharashtra, examined whether consideration earned by a film producer from licensing copyrights in cinematographic films, for the period from FY 2017-18 to FY 2020-21, should be taxed as:

• Licensing of intellectual property rights in goods other than Information Technology Software, chargeable at 12% GST under Entry 17(i) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017; or
• Licensing of Information Technology Software, chargeable at 18% GST under Entry 17(ii) of the same notification.

Dharma Productions Pvt. Ltd., as a film producer and original copyright owner, had classified its licensing activities under Heading 9973 / SAC 997332 as “Licensing services for the right to broadcast and show original films, sound recordings, radio and television programmes and the like”, and discharged GST at 12% for the pre-01.10.2021 period.

The Department, however, treated these transactions as licensing of “Information Technology Software” and demanded GST at 18%, alleging classification under SAC 998340 and invoking the concept of OIDAR services for some aspects.

The High Court not only addressed the correct classification but also considered whether the writ petitions were maintainable despite the availability of an appellate remedy before the GST Appellate Tribunal.

2. Procedural History and Demand Details

2.1 Period and Amount in Dispute

• Relevant period: FY 2017-18 to FY 2020-21 (prior to 01.10.2021, when Entry 17(i) and Entry 17(ii) carried differential GST rates of 12% and 18%).
• Disputed tax: Rs.79,72,68,337/-, plus interest and penalty.

Separate search and investigation proceedings under Section 67 of the Maharashtra Goods and Services Tax Act, 2017 were initiated on 05.10.2020. During the investigation, Dharma Productions deposited Rs.5,00,00,000/- under protest through Form DRC-03.

Multiple Form GST DRC-01A, manual DRC-01 show cause notices under Section 74, and further notices under Section 73 were issued. Orders in Original dated 05.04.2021 and 06.04.2021, read with Rectification Orders dated 09.08.2021, confirmed the demands. Appeals to the Deputy Commissioner of State Tax were dismissed by Orders in Appeal dated 17.03.2025 and 19.03.2025.

The interest and penalty figures, as upheld in appeal, were:

These figures were central to the impugned Orders in Appeal and were reproduced by the High Court.

3. Facts Relevant to Classification

3.1 Business Model of the Petitioner

• Dharma Productions Pvt. Ltd. is engaged in producing, developing and financing cinematographic films, web series and other audio-visual content.
• As producer, it is the original copyright holder in its films and owns copyrights in:
  • Script and dialogues
  • Musical works and sound recordings
  • The cinematographic film as a composite work
• These copyrights are recognised as “goods” under the GST regime in the sense of intangible movable property capable of being transferred, assigned, or licensed.

3.2 Rights Licensing Arrangements

The assessee enters into Rights License Agreements with distributors and other entities, granting a bundle of limited rights such as:

• Theatrical rights
• Satellite television rights
• Digital/OTT rights
• Music and audio rights

These contractual grants:

• Are limited in time and territory
• Do not amount to permanent transfer of the underlying copyright
• Permit the licensee to commercially exploit the rights within the contractual framework

Consistently, the assessee classified these supplies under:

• SAC 997332 – “Licensing services for the right to broadcast and show original films, sound recordings, radio and television programmes and the like”
• Covered by Heading 9973 – “Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of goods other than Information Technology software”
• Applied GST @ 12% (6% CGST + 6% SGST) during FY 2017-18 to FY 2020-21.

Post 01.10.2021, Entry 17 was amended to impose a uniform 18% rate on IP licensing (Heading 9973), which the assessee complied with.

3.3 Mode of Delivery of Film Content

The film content (the actual movie) was typically provided to distributors in the following manner:

• Predominantly by loading the film on encrypted hard disks and physically handing them over to distributors. Email trails and written acknowledgements recorded receipt of hard disks containing “movie content”.
• In a small number of cases, electronic transmission was used.

The assessee asserted that no software was supplied as part of these deliveries; only movie content was transmitted, whether by physical hard disk or electronically.

4. Department’s Stand and Legal Arguments

4.1 Classification as Information Technology Software / OIDAR

The Department alleged misclassification and argued that: