15. Service by music composer, photographer, artist to music company, producer etc
Services covered :- services by way of transfer of or permitting use the use or enjoyment of copyright covered under clause (a) of sub section (1) of section 13 of the Copyright Act, 1957 relating to original dramatic, musical or artistic works.
Supplier :- Music Composer, photographer, artist or the like
Recipient :- Music company, producer or the like located in the taxable territory.
Here both services and suppliers are specified. Services provided by following suppliers are covered
Music Composer Photographer Artist or the like
Here a generalised term of "the like" is used. So, suppliers similar to music composers, photographers, artist or like persons are covered. It seems that law makers want to cover those persons who supply services by their natural talent etc. However, we also need to understand which service is covered here. It has been mentioned that the service by way of transfer or permitting the use or enjoyment of a copy right covered under section 13 (1) (a) of the Copyrights Act, 1957 relating to original dramatic, musical or artistic work shall be covered. Readers may note that the generalised categories of suppliers given in this entry can not be clear without understanding what is covered under section 13(1)(a) of the Copy Rights Act, 1957.
Let us understand this section 13(1) of the Copyrights Act.
Subject to the provisions of this section and the other provisions of this Act, copyright shall subsist throughout India in the following classes of works, that is to say,- original literary, dramatic, musical and artistic works;
cinematograph films; and
sound recording
As readers can observe, section 13(1) of the copyrights Act have three clauses. Out of these three clauses only first clause is covered under RCM entry. i.e. original literary, dramatic, musical and artistic work. Out of works covered under this clause, work relating to dramatic, musical and artistic works are covered under this entry number 9. Work related to literary (work of author) covered separately under entry 9A.
Another important point of observation here is that suppliers like music composers, photographers, artists etc should be in relation to dramatic, musical and artist work. If it is related to cinematographic films then it shall not be covered under 13(1)(a) and hence not be covered under entry 9 of RCM notification. There is a difference between dramatic and cinematographic. Dramatic scripts or "plays" are produced on a stage, by actors performing directly and personally in the company of the audience. In cinema, however, the actors perform for the director and the camera.
The entry applies where the service involves the transfer or permission to use or enjoy a copyright as defined under clause (a) of sub-section (1) of Section 13 of the Copyright Act, 1957. This clause deals with copyrights relating to original dramatic, musical, or artistic works, excluding cinematograph films and sound recordings. Essentially, this entry covers copyright licensing services wherein a composer, artist, or photographer grants a music company, film producer, or publishing house the right to use their original creative content.
For the RCM to apply, the following conditions must be satisfied :-
the service must involve the use or enjoyment of copyright, not an outright sale or permanent assignment, and
the recipient must be located in the taxable territory and must be a business entity such as a music company or film producer.
When these conditions are met, the recipient is liable to pay GST under RCM, and the supplier (e.g., composer or photographer) is not required to charge GST on the invoice.
To illustrate, consider a situation where a music composer creates an original soundtrack and grants a music company the rights to use and distribute the track under a licensing agreement. If the composer does not transfer the copyright permanently, but only permits its usage, the transaction qualifies under this RCM entry. The music company is then liable to pay GST at 18% under RCM, and the composer is not required to collect or deposit tax.
Whether outright sale or permanent assignment of copyright shall be covered under this RCM entry ?
A very important question arise here-does the word "transfer" in the RCM entry include a permanent sale or assignment of copyright? Let's examine this in detail by harmoniously interpreting the language of the RCM notification, the Copyright Act, and the intent of GST law.
Text of the RCM Entry (Notification No. 13/2017-Central Tax (Rate))
The entry reads :-
"Services by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957, relating to original dramatic, musical or artistic works."
This entry uses both the words:
"transfer", and
"permitting the use or enjoyment"
on the face of it, the word "transfer" could, in isolation, imply an outright sale or permanent assignment of copyright. But the question is-is that how it is intended in this context?
Interpretation in Light of the Copyright Act, 1957
Under the Copyright Act, 1957, there are two modes of allowing someone else to use a copyright:
Assignment of Copyright (Section 18) - This is a permanent or time- bound transfer of ownership of the copyright itself, either fully or partially.
This is more akin to sale of an intangible asset.
Once assigned, the assignor no longer retains the right in the assigned
field.
License (Section 30) - This is not a transfer of ownership, but a
permission to use the copyright in a particular way, under certain conditions.
Ownership remains with the author or rights-holder. The license may be exclusive or non-exclusive.
Now, clause (a) of Section 13(1), which is referred to in the RCM entry, talks about the types of works protected under copyright (e.g., literary, dramatic, musical, artistic works). But it does not refer to the mode of transfer (assignment vs. license). So, the notification adopts the phrase "transfer or permitting use", drawing from both concepts.
Why "Transfer" in the Notification Doesn't Necessarily Include "Assignment" for RCM
Though the word "transfer" could literally include an assignment, in legal interpretation, especially under tax laws, we must also consider :-
Harmonious Interpretation with GST Law Objectives
RCM is meant to reduce compliance burdens for small / unregistered individuals like freelance authors, artists, composers.
These creators often license their work to publishers, labels, or producers for royalty.
If a person sells the copyright permanently, it resembles a sale of an intangible asset, and it is appropriate to tax it under forward charge, like any regular business transaction.
The compliance burden then reasonably shifts to the supplier, who is
making a capital transaction.
No Specific Inclusion of "Assignment" under RCM
If the intent was to include permanent assignment within RCM, the notification could have explicitly referred to Section 18 of the Copyright Act, which deals with assignment.
But the notification only refers to Section 13(1)(a), which defines types of works, not the mode of alienation.
Judicial and Trade Interpretation
Interpretative materials and industry practice (though limited) consistently treat RCM as applicable to licensing or temporary use, not outright sale or transfer of ownership.
The term "transfer" in this context is read ejusdem generis (of the same kind) with "permitting the use or enjoyment", meaning it should be interpreted in a narrower sense, i.e., transfer of usage rights, not ownership.
Conclusion: "Transfer" in RCM Entry = License, Not Assignment
While the word "transfer" normally includes assignment, in this context, it should be interpreted narrowly, in line with :-
The purpose of the RCM notification
The structure of the Copyright Act, and
The need to avoid shifting RCM burden onto buyers in commercial copyright assignments.
Therefore, permanent assignment of copyright is not covered under RCM, and should be taxed under forward charge, whereas licensing or permission to use is covered under RCM. In summary, in the opinion of author this RCM entry applies only to licensing or permission to use specific copyrights by creative professionals, and not to outright sales or unrelated services. When applicable, the music company, film producer, or equivalent recipient must pay GST under RCM, and the supplier remains outside the tax net for that transaction.
Examples :-
Example 1 :- Music Composer Licensing a Song to a Music Company (RCM Applies)
Mr. A, a music composer, creates an original melody and licenses it to XYZ Music Pvt. Ltd. for use in an album. The license allows XYZ Music to use and distribute the song for commercial purposes. Mr. A retains the ownership of the copyright and only permits usage.
In this case, the transaction qualifies as "permitting use or enjoyment of copyright" relating to an original musical work. Hence, GST is payable by XYZ Music Pvt. Ltd. under RCM at 18%, and Mr. A does not need to charge GST on his invoice.
Example 2 :- Photographer Licensing Image Rights to an Advertising Agency (RCM Applies)
Ms. B, a professional photographer, grants a limited usage license to an advertising agency to use her original photographs for a national marketing campaign. She retains ownership of the photographs.
Since this is a copyright licensing service relating to original artistic work (photographs), and the recipient is a business entity, the advertising agency must pay GST under RCM.
Ms. B does not need to register or pay GST for this transaction if it is solely covered under RCM.
Example 3 :- Permanent Sale of Copyright by an Artist (Forward Charge Applies)
Mr. C, a graphic artist, sells all rights and ownership of an original logo design to a corporate client for a lump sum consideration.
Here, the transaction is not a license or permission, but a permanent assignment of copyright. This falls outside the RCM entry, and Mr. C must charge GST under forward charge, if he is registered or liable to register under GST.
Example 4 :- Composer Provides Jingle and Retains No Rights (Forward Charge Applies)
Mr. D, a jingle composer, is hired by a film production house to create a promotional tune. The production house requires complete ownership and usage rights over the jingle, and the agreement confirms transfer of full copyright.
This is a case of outright assignment of copyright, not mere licensing. As such, the transaction is taxable under forward charge, and Mr. D must issue a tax invoice and charge GST, assuming he is a registered supplier.
Example 5 :- Licensing of Cinematograph Film Rights (Not Covered under this RCM Entry)
XYZ Studios grants a license to a regional distributor for the theatrical rights of a completed film. The transaction involves cinematograph film, which is not covered under clause (a) of Section 13(1) of the Copyright Act.
Hence, this does not fall under the RCM entry discussed. Depending on the registration status of the parties, forward charge may apply, and the supplier (XYZ Studios) would be liable to charge GST.