Bombay High Court Quashes GST Demand Against Dharma Productions

The Bombay High Court quashed GST demands against Dharma Productions Pvt. Ltd. and Dharmatic Entertainment Pvt. Ltd. after ruling that the licensing of copyright in cinematographic films does not constitute information technology software. The dispute concerned the financial years 2017-18 to 2020-21, during which tax authorities sought to apply an 18% GST rate for IT software rather than the 12% rate the companies paid for broadcasting and showing original films.

Justices MS Karnik and Sandesh Patil determined that films are passive audio-visual works that lack the execution or interactivity required to meet the statutory definition of software. The court held that the classification of the supply depends on its essential character rather than whether the content is delivered via digital links or encrypted hard disks.

The court rejected the tax department's argument that the companies should have used the GST Appellate Tribunal, ruling the petitions maintainable because authorities acted without jurisdiction by misconstruing statutory definitions. Additionally, the bench criticized the authorities for withholding a key statement from the post-production head of Dharma Productions and failing to provide technical evidence to support their classification.