Services covered :- transfer or permitting use or enjoyment of a copyright covered under clause (A) of sub section (1) of section 13 of the Copyrights Acts 1957 relating to original literary works
Supplier :- Author
Recipient :- Publisher located in the taxable territory
Readers have observed during discussion on entry 9 that out of four works covered under section 13(1)(a) of the Copy Rights Act, 1957, i.e. original literary, dramatic, musical and artist works three works which are other than work of literary are covered under entry 9, however, original literary work is not covered under entry 9. A separate entry 9 A has been inserted for this work. As per this entry, service provided by an author to a publisher by way of transfer or permitting the use of a copy right covered under section 13(1)(a) of Copyright Act, 1957 relating to original literary work shall be covered under RCM.
A proviso has been added to this entry which gives option to the author who has taken GST registration to charge GST in his invoice issued to publisher under forward charge. This option may have been given to the authors due to removal of certain hardships to authors and publishers. Let us assume that a CA has taken registration under GST. He writes a book on GST and permits use of copy right to a publisher. If this service is taken under RCM then for the author (who is a CA) there will be a problem due to operation of section 17(3). As per this section supplies covered under RCM shall be considered as exempt supply and he need to proportionately reverse input tax credit. Instead if he has option to charge GST in his invoice then this problem can be resolved. Further, there are publishers who sells only books which is considered as exempt supply.
As per section 23(2), if a person is engaged in merely supply of exempt goods or services, he is not required to take GST registration. Now assume that the author is writing a book for this publisher. He charges royalty for use of copy right from publisher. If this is compulsorily covered under RCM then the publisher is required to take GST registration for payment of GST under RCM. Instead if an option is given to the author to charge GST in his invoice under forward charge then the publisher is relieved from the burden of taking registration and other consequential procedures.
Hence, to remove these difficulties the option of forward charge is given in this entry.
When RCM Applies and When It Doesn't ?
As per the amendment vide Notification No. 22/2018-Central Tax (Rate) dated 6th August 2018, RCM is applicable only where the author is not registered under GST and has not taken the option to pay tax under forward charge. The mechanism is structured as follows :-
If the author is not registered under GST, or is registered but chooses not to pay tax under forward charge, then RCM applies, and the publisher must pay GST at 12%.
If the author is registered and has opted to pay tax under forward charge, then the author may issue a tax invoice and collect GST (forward charge applies).
To exercise the option to pay tax under forward charge, the author must file a declaration in Form GST Annexure I with the jurisdictional GST officer and must also inform the publisher in writing before the beginning of the financial year. The publisher, in turn, must obtain a declaration in Form Annexure II and retain it for audit and compliance.
Examples :-
Example 1 :- Author Not Registered, RCM Applies
Mr. A, a freelance author, provides the right to publish his book to ABC Publications Ltd. Mr. A is not registered under GST and has not opted to pay tax under forward charge.
This transaction qualifies for RCM, and ABC Publications must pay GST at 12% on the royalty or consideration paid to Mr. A.
Example 2 :- Registered Author Opts for Forward Charge
Ms. B, a well-known author, is registered under GST and has opted to pay GST under forward charge by filing the required declarations. She assigns publication rights to XYZ Publishing House and issues a tax invoice charging 12% GST.
In this case, RCM does not apply. The publisher is not liable to pay tax under RCM, and Ms. B collects and remits GST herself.
Example 3 :- No Declaration Filed, Default RCM Applies
Mr. C is registered under GST but has not submitted the required declaration opting for forward charge. He gives publishing rights to PQR Publications.
In absence of the declaration, the transaction is presumed to be under RCM, and PQR Publications must pay GST at 12%.
Important discussion on Entry no 9 and 9A of the notification no 13/2017- CTR
Readers may note that Entry No. 9 of Notification No. 13/2017-Central Tax (Rate) has been substituted and a new Entry No. 9A inserted via Notification No. 22/2019-CTR dated 30th September 2019, effective from 1st October 2019. These changes were made to distinguish between different categories of copyrighted works under the Copyright Act, 1957, and to allow specific treatment for authors.
As per Section 13(1)(a) of the Copyright Act, 1957, four categories of original works are protected :-
Literary works
Dramatic works
Musical works
Artistic works
Previously, Entry No. 9 covered all four types of works and brought them under reverse charge, when the copyright in such work was transferred or permitted to be used by a person such as a music company, producer, or publisher.
However, through the above amendment:
The "literary work" has now been excluded from Entry No. 9, and
A new Entry No. 9A has been inserted to deal exclusively with literary works authored by authors, provided they are not in the nature of music, photographs, or art.
Most importantly, only Entry No. 9A allows the option of paying GST under forward charge, subject to the author filing a declaration in Form GST Annexure I with the recipient and jurisdictional officer. This means:
Authors can choose whether they want to discharge GST under forward charge or allow the recipient (e.g., publisher) to discharge under RCM, whereas composers, artists, and photographers covered under Entry No. 9 do not have this option - GST in their case must be paid under RCM by the recipient (i.e., music company, producer, etc.).