VIDEO-TAPE PRODUCTION SERVICES
Video-tape
production services were brought under the Service Tax net by the Finance Act,
2001, w.e.f. 16th July, 2001 vide Notification No. 4/2001, dated 9-7-2001.
The services shall be taxed if provided by a video production agency.
Rate of Service Tax: The rate
of service tax is specified in section 66 of the Act. The Finance (No. 2) Act,
2004 has substituted the charging section 66, and the rate of service tax is
enhanced from 8% to 10% ad valorem. The increase in tax rate has come into
force from the date of enactment of the Finance (No. 2) Act, 2004 i.e. 10-9-2004.
Further, the Finance (No. 2) Act, 2004, w.e.f. 10-9-2004 has also
levied an education cess @ 2 % of the service tax. The cess paid on inputs
services shall be available as credit for payment of cess on output services.
For further discussion in this regard, refer to 'Payment of Service Tax'.
'Video-tape production services'
The
definition of video-tape production service has been given under clause
(120) of section 65. That is:
"
Video-tape production" means the process of any recording of any
programme, event or function on a magnetic tape and includes editing thereof,
in any manner".
The
definition of video-tape production services is very specific, thus a
service will fall under this category, if it satisfies the following points
1. it is a process of any recording;
2. recording may be of any programme, event
or function;
3. recording should be on
magnetic tape;
4. includes editing thereof;
5. in any manner.
(1) 'process' of any 'recording'
The term
'process' means 'series of operation used in making or manufacturing something'
(reference Oxford Mini Dictionary) and the term ‘recording' means 'record of
sound or images made, for later reproduction' (reference Chambers English
Dictionary). Therefore, in the context of this service 'process of any
recording' refer to series of actions or events to record images for making of
video-tape.
(2) 'programme, 'event' or ‘function'
The terms
'programme', 'event' or 'function' have not been specifically defined in the
context of service tax. Therefore, these terms should be understood in the
context of its commonly understood meaning and scope. These words must be
broadly construed so as to include meetings, marriages, celebrations, social
events, seminars, conferences, get-togethers, kitty parties, religious
functions or any cultural programmes, etc. Thus in the context of this service
'programme', 'event' or 'function' may be official, social or business.
(3) Government clarification
The Government in its Circular F. No. B. 11/1/2001-TRU, dated 9th July, 2001 (appended as Annexure 1) has clarified that the taxable service includes recording of serials, tele films or any other programme meant for broadcasting.
(4) 'magnetic tape'
The term
'magnetic tape' means flexible plastic tape, coated on one side with magnetic
material used to register for later reproduction of television images, or sound
or computer data' (reference Chambers English Dictionary).
(5) 'editing'
The term
'editing' means 'prepare (a film or recording) by arranging sections in
sequence (reference Oxford Mini Dictionary). The Government in its Circular F.
No. B. 11/1/2001-TRU, dated 9th July, 2001 (appended as Annexure 1) has
clarified that editing, colouring, dubbing, printing titles and special
effects, film processing, etc. by a video production agency will fall within
the scope of videography service. However, it is clarified that reproduction of
original master to make further copies of a video-tape will not come
within the purview of service tax. Therefore, in the present context, editing
means to make change by giving effects in either way in the already recorded
images for later reproduction, but it shall not include to make further copies
from master copy.
(6) 'in any manner'
The scope
of taxable service covers any service in relation to video tape production in
any manner. Thus, facilitation activities, such as providing studio, other
facility as lights, gadgets, instruments, devices, providing technical persons
for operating the recording devices or for any other activity in relation to
video tape production are also covered under video-tape production
services and taxable.
The
definition of taxable service provided by a video production agency has been
given under sub-clause (zi) of clause (105) of section 65. That is:
“any
service provided "to a client, by a video production agency in relation to
videotape production, in any manner".
(1) Editing, colouring, etc. are taxable
services
Yes, the
Government in its Circular F. No. B. 11/1/2001-TRU, dated 9th July, 2001
(appended as Annexure 1) has clarified that editing, colouring, dubbing,
printing titles and special effects, film processing, etc. by a video production
agency will fall within the scope of video-tape production services.
(2) Copies of video tape are chargeable to
tax
No, the
Government in its Circular F. No. B. 11/1/2001-TRU, dated 9th
July, 2001 (appended as Annexure I) has clarified that reproduction of original
master to make further copies of a video-tape will not come within the
purview of service tax.
(3) Press videographers are excluded from
taxable services
The
Government, in respect of 'photography service' in its Circular F. No. B.
11/1/2001-TRU, dated 9th July, 2001 (appended as Annexure 1) has
clarified that news agency services, that is, press photographers are excluded'
from the photography services. Though, no separate clarification has been
issued in respect of video-tape production services so as to exclude the
press videographers from the taxable services, but same may apply here also.
(4) Selling of T V serial episodes to TV
Channels is taxable service.
No. It was
reported to the Government that in some jurisdictions service tax is being
demanded on the services of selling of TV serial episodes to the TV channels
under the category of Videotape Production Services. The issue was examined by
the Central Board of Excise and Customs and Board in its Circular No.
78/08/2004-ST, dated 23rd March, 2004 (appended as Annexure III) has
clarified that the tax is limited to the technical function of recording or
editing what is recorded and not on the entire gamut of production of serials
and "no tax is leviable on the producers for selling the serial to
channel". It may be noted that by the Finance (No. 2) Act, 2004, w.e.f. 10-9-2004,
the TV or Radio programme service has been separately brought under the service
tax net which has been discussed in the said service.
Service
tax is liable to be paid when video-tape production service is rendered
by 'video production agency'.
(1) 'Video production agency'
Video
production agency means any professional videographer or any commercial concern
engaged in the business of rendering services relating to video-tape
production" [clause (119) of section 65].
The
term 'video production agency' means
§
any professional videographer; or
§
any commercial concern.
(a) 'professional videographer' or
'commercial concern'
The term 'professional videographer' here refers to individual videographer, who has special knowledge and expertise in the field of videography and whereas the term 'commercial concern' denotes a firm or a business entity or organization, engaged in commercial activities like sale, purchase or providing services for consideration and having profit motive. A charitable institution cannot fall under the category of a 'commercial concern', because it does not has profit motive. The term 'commercial concern' in the context of service tax means the concern engaged in providing services of videography, it is not necessary that the person who owned the concern must also be videographer, such concern may be involved in providing videography services by employing other 'professional videographers' with whose professional expertise and assistance, it runs its business.
Therefore,
service tax is liable to be paid only when videography services are rendered by
'professional videographer' or 'commercial concern' engaged in business of
rendering service relating to videography.
(2) Individual is liable to pay service tax
No, the
Government, w.e.f. 9-7-2001, has exempted the taxable service
provided by an individual professional videographer (vide Notification No.
7/2001 appended as Annexure II). Therefore, even if every professional
videographer has been included in the definition of 'video production agency',
but in view of aforesaid Notification an individual who is rendering video
production services will not be covered under service tax.
(3) Producer is liable to pay service tax for
the serial to TV Channels
No. The
Central Board of Excise and Customs in its Circular No. 78/08/2004-ST,
dated 23rd March, 2004 (appended as Annexure III) has clarified that in case
the producer hires a video-grapher or an editor, the payment made for
services would be taxable at the hands of such service providers. However, no
tax is leviable on the producers for selling the serial to channel.
Video-tape production services liable to be charged to
tax
Video-tape
production services are to be charged to service tax when provided to -
§
a client;
§
in any manner;
§
in relation to video-tape production.
(1) Client
Services
are liable to be charged to tax only when they are provided to a 'client'. The
word 'client' as per the dictionary meaning means "a person who employs a
lawyer or professional adviser: a customer" (reference the Chambers
English Dictionary) or "a person using the services of a professional
person; customer" (reference the Oxford Mini Dictionary).
Therefore,
the 'client' is necessarily an external person who hires or uses the services
of another person for consideration. Service tax will attract only if services
are rendered to a client, not to the other department within the same concern.
In other words, services must be provided to the separate entity or external
person. When services are provided to a charitable institution for which no fee
is charged it is not a client. Therefore, there is no question of service tax unless
services are provided to a client on payment basis.
(2) Meaning of 'in any manner'
Services
are subject to tax when provided 'in any manner'. The words 'in any manner'
signify 'directly or indirectly'. Thus, facilitation activities, such as providing
studio, other facility as lights, gadgets, instruments and devices, providing
technical persons or for any other activity in relation to videography are
taxable.
Sometimes,
it may be possible that service provider may not alone be able to execute the
work and take the help of other person or concern by employing them on sub-contract
basis for the execution of work. In other words, services need not be rendered
personally by the professional videographer or commercial concern itself, they
can render the service of videography by employing the services of other
persons and concerns. In this case, even if service provider gets a part of the
service done by employing the services of other person or concern, it will be
treated that services are provided by the original service provider and tax
would be charged on the entire services.
The value of taxable services for charging
tax
The value
of taxable services in relation to services provided by the video production
agency to the client shall be the gross amount charged from the client in
relation to the process of recording of any programme, event or function on a
magnetic tape and includes editing thereof [section 67].
When video
production agency provides facilitation activities, such as studio, other facility
as lights, gadgets, instruments, devices etc the service charges paid for the
use of these facilities, and such charges form part of taxable value.
(1) Cost of unrecorded magnetic tape, etc. is the part of value of taxable services
No, as per
Explanation 1 to section 67, for the removal of doubt, in respect of video-tape
production services, it is declared that the value of taxable services does not
include the cost of unrecorded magnetic tape or such other storage devices sold
to the client during the course of providing the video-tape production
services. In the case of Kerala Colour Lab. Association v Union of India (2003)
156 ELT 17 (Ker) it was held that the exclusion from the value of taxable
service the costs of unexposed photography film, unrecorded magnetic tape or
such other storage devices sold to the client during the course of providing,
the taxable service is neither discriminatory nor violative of the fundamental
right guaranteed under Article 14 of the Constitution.
(2) The deduction for cost of magnetic tape,
etc. is allowed
To claim
benefit of the cost of unrecorded magnetic tape or such other storage devices,
it is advised to show them clearly on the invoices along with description and
particulars of the magnetic tape or other storage devices, otherwise, the claim
will not be considered as admissible, keeping in view the Government
clarification in respect of 'photography services', which is applicable in this
case also. The Government, in respect of 'photography service', in its Circular
F. No. B. 11/1/2001-TRU, dated 9th July, 2001 (appended as Annexure 1)
has clarified that the service provider claiming benefit of the cost of film
should be advised to show them clearly on the invoices along with description
and particulars of the film. Otherwise, the claim will not be considered as
admissible.
(3) Cost of materials, chemicals, etc.
excluded from the taxable value
No, the Government, in respect of 'photography service', in its Circular F. No. B. 11/1/2001-TRU, dated 9th July, 2001 (appended as Annexure 1) has clarified that no other cost (other than the cost of unexposed photography film) such as photographic paper, chemicals, etc. is excluded from the taxable value. Though, no separate clarification has been issued in respect of video-tape production services but, same is applicable here also.
Therefore,
in case of video-tape production services, the value of taxable services
shall be the gross amount charged by the service provider for such services
rendered by him without claiming any abatements towards administrative/office
expenses incurred for rendering such services. In other words, 'gross amount'
here indicates that no deduction shall be allowed in respect of any expenditure
incurred by the service provider which has proximate connection in rendering
the services by him, but deduction shall be given in respect of cost unrecorded
magnetic tape or such other storage devices sold to the customer during the
course of providing the video-tape production services.
Exempted video-tape production services
(A) Exemption to individual video-grapher
The
Government by Notification No. 7/2001, dated 9-7-2001, w.e.f. 16-7-2001,
has exempted all the taxable service provided to a client in relation to video
tape production by an individual professional videographer from the whole of
the service tax (vide Notification No. 7/2001 dated 9th July, 2001 appended as
Annexure II). In the case of Kerala Colour Lab. Association v Union of India
(2003) 156 ELT 17 (Ker) it was held that the statute levying service tax is not
liable to be challenged on the ground that it does not impose service tax on
free lancers but imposes it on the photographers having a registered
establishment.
(1) Shops and studios, providing video-tape production services, are exempted
No, the
Government in its Circular F. No. B. 11/1/2001-TRU, dated 9th July, 2001
(appended in Annexure 1) while referring to exemption Notification No. 7/2001-ST,
dated the 9th July, 2001, has clarified that "as such, the tax is payable
by studios, shops and other establishments carrying on business of rendering of
services in the field of videography". In fact, intention is to give
benefit of exemption to those individuals who do not have fixed place of
business or shop. In essence, service tax is payable by studios, shops, or any
other office or establishment, etc. and not by the individual professional
videographers.
(B) General Exemption
The
Government has granted exemption from the whole of Service Tax in respect of
all taxable services, for services provided to United Nations or an
International Organisation. Similarly, the exemption, subject to certain
conditions, has also been granted for taxable service provided to a developer
or units of Special Economic Zone (SEZ). The Government, w.e.f. 20 November,
2003 has restored the exemption, as an interim measure, from the whole of
service tax when payment is received in convertible foreign exchange for the
taxable services rendered in India provided it was not repatriated from or sent
outside India, such exemption was earlier withdrawn w.e.f. 1-3-2003.
The reader may note that detailed discussion about aforesaid exemptions along
with relevant notifications have been given in the 'Exemption from whole of
Service Tax - Some Cases'.
N.B. The readers may note that provisions, procedures and other related discussion related to registration, payments of service tax, filing of return, interest and penalty, assessment procedure, appeal, refund of tax, etc., which are same, as applicable in respect of other taxable services, have been given in separate.
Clarification on the scope of the term
for levy of service tax
1 As per section 65(83)
(as it then was), "video tape production" means the process of any
recording of any programme, event or function on a magnetic tape and includes
editing thereof, in any manner. As per section 65(72)(zi) (as it then was),
taxable service is any service provided to a client by any video-tape
production agency in relation to video tape production in any manner.
2. It may be seen that the
taxable service covers the service of recording of any programme, event or
function and includes recording of serials, telefilms or any other programme
meant for broadcasting. Also, the scope of taxable service covers any service
in relation to video tape production in any manner. Thus facilitation
activities, such as providing studio, other facility as lights, gadgets,
instruments, devices, providing technical persons for operating the recording
devices or for any other activity in relation to video tape production are
taxable. Similarly, editing, colouring, dubbing, printing titles and special
effects, film processing, etc. by a video production agency will all come
within the scope of this service. It is clarified that reproduction of original
master to make further copies of a video-tape will not come within the
purview of service tax.
2.1 Services provided by
individual videographers has, however, been exempted vide Notification No.
7/2001-ST, dated the 9th July, 2001. As such, the tax is payable by
studios, shops and other establishments carrying on business of rendering of
services in the field of videography.
Exemption of taxable service provided
by an individual professional videographer
In
exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of
1994), the Central Government, being satisfied that it is necessary in the
public interest so to do, hereby exempts the taxable service provided to a
client by an individual professional videographer in relation to video tape
production from the whole of the service tax leviable thereon under section 66
of the said Act.
2. This notification shall come into force on the 16th day of
July, 2001.
Service Tax on the production of
Television serials
Representation
have been received in the Board with regard to levy of service tax on the
activities undertaken by the television serial producers, who either -
(i) sell TV serial episodes to the TV
channels;
(ii) allow such episodes to
be telecasted by the channels in lieu of procurement of Free Commercial Time
(FCT), which is sold by them to advertising agencies for showing
advertisements.
2. It appears that in some
jurisdiction service tax is being demanded on the services listed at (‘i’)
under the category of Videotape Production Services, and in respect of services
listed at ('ii') under the category of Advertisement Agency Services.
3. The issue has been
examined. The taxable service i.e. "video tape production service" is
on the process of recording of any programme, event or function on magnetic
tapes (including editing thereof). The tax is therefore limited to the
technical function of recording or editing what is recorded and not on the
entire gamut of production of serials. In case the producer hires a videographer
or an editor, the payment made fro services would be taxable at the hands of
such service providers. However, no tax is leviable on the producers for
selling the serial to channel.
4. Similarly, in case of
FCT, selling the time allotted to a producer does not fall within the purview
of "advertisement service" since this activity is not connected to
making, preparation, display or exhibition of advertisement. This is akin to
providing space in a newspaper or magazine for publishing an advertisement and has
nothing to do with actual presentation of the advertisement.