GST for musicians and sound professionals : Q&A part 1
The Goods and Services Tax in India is a landmark change in the indirect taxation system, aimed to simplify doing business across all sectors and across our country. The GST Council is listening to feedback from the industry and is constantly evolving the Act to make this new system even smoother over time.
For the music industry in India (especially the musicians and sound professionals), I have been approached by SudeepAudio.com to answer queries received on impact and benefits of GST in their work life / business / profession.
For certain terms like RCM, ITC, IGST, etc. please read my overview on GST post.
The following questions have been answered to the best of my ability, and please always refer to recent changes brought about in the Act in consultation with your CA. You are also free to contact me on email for any further clarifications you need.
Q1. Is my business as a musician / composer / sound engineer a B2B (Business to Business) or B2C (Business to Consumer)?
The type of business transaction between two people or entities will never determine whether it is B2B or B2C.
The recipient of the service or goods will decide the type of transaction.
In the case of music composer / producer / sound engineer, mostly the recipient of the services will be say a production house or an advertising agency which makes it a B2B transaction.
Q2. I work in a recording studio on salary basis, but also freelance as a sound engineer from home / handle FOH work. So should i register for GST?
You are liable for GST registration if you earn revenue over & above 20 lakhs in a financial year (this amount is Rs. 10 Lakhs in some states) from your freelancing profession, or if you are providing certain services as specified for compulsory registration (subject to certain notifications issued).
Another point to be noted is that Salary income is not covered under the net of GST.
Q3. My annual income is currently under 20 lakhs. However, I provide services over email like mixing and mastering to clients outside my state (where i work from) as well as outside India. Should i take GST number even then?
GST act and rules have prescribed certain categories of person how shall be liable to get themselves registered even if their turnover is under 20 Lakhs. So accordingly you have to get yourself registered in this case. However with recent notifications issued by the department, they have given some relaxation for registration in certain circumstances. Consult a CA as each case would be different.
Q4. When i buy a product from an online store in India or a regular store, should my GST number be mentioned on the bill?
Invoice is the document to claim input tax credit and if you want to claim input tax, it is mandatory to get your GST number mentioned on the invoice. The billing address should also be the same as your GST registered address on these invoices.
Q5a. I work from my home studio. For which products and services should i take GST input benefit on my purchases?
You can take input tax credit for any inward supplies used for furtherance of business, subject to such input credits which are blocked under the act (example: food bill or motor car purchase).
Q5b. Can i pay rent to my father who owns the house where i work from?
If you are using the place for purpose of business, you will be eligible for input tax credit.
If your father is also a GST registered individual, he will charge you the tax in his invoices. In case he is not a registered person, you need to pay RCM on the rent amount and then claim input tax credit.
However, payment of RCM on purchases from unregistered persons has been deferred till 31st March, 2018.
Q6a. If i buy a product from outside India – for example: downloadable software – what is the GST impact on such a purchase?
This kind of a transaction (even software download from outside India) will be considered as an Import and will be liable for IGST. The person doing such an activity will be treated like any importer and is liable to pay IGST and can then take credit of such IGST paid as ITC against output liabilities.
However, such a person needs to have a registered, valid IEC (Import Export Certificate) to engage in such transactions.
Q6b. If a relative of mine or musician friend of mine hand carries a product for me or if i buy a product when i am say in USA, then can i show this expense in my purchases in Income Tax?
Any purchases outside India on your own or by anybody else on your behalf, are liable for custom duty subject to the custom rules, and also as it will consider as imports you need to pay IGST on such imports.
So your purchase is legally valid only if it is paid for duty (as applicable) and IGST as well.
Q7. What expenses can i take under Income Tax depreciation?
As per income tax act, you can avail depreciation on any fixed assets used for business purpose. As long as the product or services purchased have been paid for the applicable import duty and GST with valid receipts.
Q8. What things should i be careful about in the GST regime to make the most of it?
GST is one of the biggest tax reforms in our country and will be a game changer in indirect taxes.
Whenever you make an outward supply, you need to identify if it is an interstate or intrastate supply, because this will determine your tax liability. i.e. will you have to charge i) IGST or ii) CGST & SGST accordingly.
Then you need to classify your goods or services according to HSN or SAC codes specified to determine your applicable rate of tax on such goods or services.
While receiving inward supplies make sure your invoice is having all the prescribed details along with your trade name and GST number. And while making outward supplies, you should issue invoice with all prescribed details of the purchaser correctly.
All this may sound too tedious, but in a couple of invoices you will easily get the gist of the matter.
Q9. I have a GSTIN and the person who i am billing to does not. What happens then?
In that case the transaction will be B2C. And you need to mention person name and address on the invoice issued by you also.
Tax to be charged in such a case:
– same state billing – You need to charge CGST & SGST
– inter-state billing – You need to charge IGST
– outside country billing – No tax, subject to fulfilment of certain conditions
Q10. What about music classes or academy? Students don’t have GST. Nor their parents. So how is GST beneficial to me in such cases?
In this case, it will be B2C transaction. You have to pay GST at prescribed rates and the recipient being unregistered person they will not be eligible for input credit.
ITC from your own business purchases (for example: musical instruments, furtniture, equipments, software, etc.) for your class / academy / studio can be offset against the GST collected from the student fees.
Q11. Sometimes we get our songs mastered by international engineers based in UK and USA. What is the GST impact in that case?
In the give situation, services received from outside India will be considered as Import of services and will attract IGST as explained above.
Q12. What is RCM and how should that be managed by me?
RCM stands for Reverse Charge Mechanism. In certain specific circumstances the recipient of goods or services will have to pay this tax called RCM. For instance, in case of a Goods transport agency, the recipient of service will need to pay tax under RCM.
Another important case is if you make any inward supplies from an unregistered dealer you are liable to pay tax under RCM. However, with a recent notification, the RCM on unregistered dealer has been deferred till 31st March, 2018.
Q13. Can i claim input credit from car service / repair or Studio furniture or AC maintenance annual maintenance contracts?
Yes absolutely! Any input tax credit can be availed if the service or goods are used for furtherance of business, subject to block credits mentioned in the act.
The expenses incurred for running your studio or servicing equipment etc should have the GST charge in it for you to take them as your input credit.
Q14. What about expenses incurred while touring in India for work (example: hotel stay bills for overnight stay?).
In case of hotel bills for overnight stay, the hotel will charge CGST & SGST in the state where the hotel is situated. So if you are registered in that state, only then you can avail ITC. Flight tickets are also eligible for ITC, provided your GSTIN is mentioned at the time of booking.
The next part will answer some more questions received over the last few months.
You can also watch the #converSAtion video that shared the benefits of buying your studio products (both hardware and also downloadable software) from local dealers and save yourself from the trouble of tax filing and thereby focus on music making.