Service Tax on Movie Theatres
The Department is as usual thoroughly confused and issuing contradictory directions:
An Assistant Commissioner of Service Tax in Mysore responded officially to a query as,
Sub : Service Tax on theatres -reg.
In response to your letter dated 23.7.2007 on the subject mentioned above, it is clarified that the activity of screening the film on fixed share basis and on percentage basis would attract service tax on the consideration of amount received under heading "Renting of immovable property service". Explanation to clause 90(a) of Section 65 of the 'Finance Act' 1994 specifically includes, interalia , theatres and exhibition halls and the service tax levy his come into force on 01.06.2007.
However, the activity of buying the films for screening does not come under service tax net.
To this, the Commissioner, Service Tax in the Board reacted with a letter to the Chief Commissioners as follows:-
Please find enclosed herewith a letter issued by the Assistant Commissioner, Mysore , informing a movie theatre owner that the activity of screening of films supplied by a film distributor would fall under taxable service namely, "renting for immovable property " from 01.06.07. Therefore, the picture houses are required to pay service tax on the amount received from the film distributors.
02. In this regard, preliminary enquiry conducted by this office reveals that generally a film distributor supplies a print of a film to the owners of movie theatres, who run the same using their own manpower and infrastructure. The distributor has no control over the screening of film. He gets either the share of the total collections or a fixed sum (depending on the success or failure of a movie). From the above facts, it does not appear that the movie theatre which is rented out to the distributor is thus providing the aforesaid taxable service.
03. In this connection, it also requires examination, whether delivery of the content of the cinematograph film by the distributors to the movie theater owners for a charge, would fall under any other taxable service such a IPR Service, Business Auxiliary Service, Business Support Service etc. This issue becomes relevant as transfer of such films in encrypted form has been specifically exempted under notification No. 12/2007-ST dated 01.03.07.
04. It is requested that the facts, your views on the issues and the reasons for concluding that the said activity falls/ does not fall under taxable services, may please be informed to the undersigned, so as to reach this office by 31.8.207.
As of now, we are not sure, what the latest opinion of the Board is, but we only hope that after reading this, the Service Tax Department does not go on a raiding spree of all movie theatres.
Life would be less miserable if officers stop giving clarifications.
CBEC F.No . 137/186/2007- CX.4 Dated : August 23, 2007