| 06 Jun 2023
ET to fall but broadcasting equipment and IT may rise under GST

NEW DELHI: Even as entertainment duties on entrance to theatres or circus will fall after the Goods and Services Tax comes into force, hardware equipment for both radio and television transmission and reception is expected to rise.

The rates on services by way of admission to entertainment events or cinematography films in cinema theatres is 28 per cent under the Goods and Services Tax as compared to some states which have been charging as high as 100 per cent until now.

The rate of entertainment tax on cable TV and Direct-To-Home (DTH) has been fixed at 18 per cent by the GST Council as compared to the range of 10 per cent to 30 per cent in many States, apart from service tax at 15 per cent.

Thus, taxes on entertainments and amusements (covered by the erstwhile entry 62 of State List of the Constitution) have been subsumed under GST except to the extent of taxes on entertainments and amusements levied by a Panchayat or a Municipality.

The rate of GST approved by GST Council on access to circus, theatre, Indian classical dance including folk dance and drama is 18 per cent ad valorem. Further, the GST Council has approved an exemption upto a consideration for admission of Rs 250 per person. These services currently attract entertainment tax levied by the States.

Thus, entertainment services will be lower under GST. In addition to the benefit of lower headline rates of GST, the service providers shall be eligible for full input tax credits (ITC) of GST paid in respect of inputs and input services. Presently, such service providers are not eligible to avail of input credits in respect of VAT paid on domestically procured capital goods and inputs or of Special Additional Duty (SAD) paid on imported capital goods and inputs. Thus, while GST is a value added tax, entertainment tax, presently levied by the States is like a turnover tax.

Transmission and reception apparatus for both radio and television have been placed in the top category of 28 per cent of the four slabs of the GST. However, the rates may stabilize as taxes levied by states are subsumed in GST.

Other items coming under the 28 per cent slab are: single loudspeakers, mounted in their enclosures, audio-frequency electric amplifiers, electric sound amplifier sets, parts; sound recording or reproducing apparatus; and video recording or reproducing apparatus, whether or not incorporating a video tuner.

Transmission equipment for radio or TV broadcasting reception apparatus or sound recording or reproducing apparatus; television cameras, digital cameras and video cameras recorders reception apparatus or sound recording or reproducing apparatus; television cameras, digital cameras and video cameras recorders also come under this slab.

Monitors and projectors, not incorporating television reception apparatus, reception apparatus for television, whether or not incorporating radio-broadcast receiver/sound/video recording or reproducing apparatus also fall in this category.

Meanwhile, BMR Advisors have said that the information technology sector needs to brace for increase in rates of tax under GST. However, effective planning of credits including on transition stock may aid the sector in mitigating this impact.

In information technology, both imported and domestically produced mobile phones come in the 12 per cent slab.

Shrink Wrapped software product (on media) will attract tax rate of 18 per cent, as will Laptops, desktops, peripherals, parts, etc

Monitors and projectors (capable of connecting to ADP) will attract a rate of 28 per cent while the majority of networking products will attract 18 per cent.

Temporary transfer or permitting the use or enjoyment of any Intellectual Property will attract a GST of 12 per cent.

In services, Software services, i.e., development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software will attract 198 per cent GST while electronic supply of software will attract a tax of 12 per cent.

IT services including consulting, implementation, advisory will attract 18 per cent.

The Consultancy says that ambiguity may arise with respect to taxability of electronic software and related services at 12 percent or 18 percent in absence of a specific entry in the rate schedule.