Overview on GST Act for music and sound professionals
What is GST?
Goods and Services Tax (GST) is a multi-stage tax levied on every value addition at each stage, and the chain will finally end when such goods or services are consumed by an end-user (called consumer).
Till the chain continues, each stage will be a B2B (Business to Business) transaction & the final transaction with a consumer will be considered as B2C (Business to Consumer).
For example: Let us take a song production process from scratch.
A Lyricist, musicians, music producer, sound engineers, recording studio giving their service to a composer is a B2B transaction at every stage of value addition to the song creation.
…The composer then supplying the final song to the film’s producer is also B2B.
…The film producer giving this song to a music label is B2B.
…The label giving the song to a streaming service is B2B as well.
…The streaming services offering it on their app to listeners is the final transaction = B2C. Period.
Moreover, GST is a destination based Tax – which means the State which consumes the product or services will earn the revenue.
What are the components of GST?
There are 2 applicable taxes under GST for intra-state sales (i.e. seller & buyer both are in say the state of MAHARASHTRA)
- CGST: Collected by the Central Government on an intra-state sale.
- SGST: Collected by the State Government (Maharashtra) on an intra-state sale.
There is IGST for interstate sales (i.e. seller is from Maharashtra & buyer is from Karnataka)
- IGST: Collected by the Central Government for inter-state sale.
In this IGST transaction, the Central government will collect whole GST amount at applicable rates and transfer half the portion to Karnataka, as the goods / services were consumed in Karnataka.
REGISTRATION UNDER GST
Registration is compulsory for those persons,
- whose aggregate turnover exceeds the specified limit i.e. Rs. 20 Lacs / 10 Lacs in some states,
- person making any inter-state supplies,
- person Importing or Exporting of goods or services,
- and other persons as notified by Government.
A person can also obtain voluntary registration irrespective of his / her turnover.
BENEFITS OF GST REGISTRATION
A GST registered person can take input credit on their own purchase & input services used for furtherance of business.
A Registered person can become more competitive, as buying of goods / services from a registered dealer will ensure input credit for purchaser of goods or recipient of services.
A Registered person can operate freely across India.
(for Import or Export of Goods / Services, they should have an IEC registration as well).
If you are not a registered person and you are selling or providing any goods or services, the purchaser (if a registered person) of your goods or recipient of services will be liable to pay tax on reverse charge basis.
To avoid such hassles, many ad. agencies now don’t offer jobs to unregistered music composers and sound recording studios!
So it is beneficial overall to be a GST registered individual if you are self employed.
INPUT TAX CREDIT (ITC)
If you are registered person, you will be eligible for input credits for the goods or services utilized for furtherance of business, subject to BLOCK credits specified by Government.
Even in case you purchase Capital Goods for your business, you will be eligible for input tax credit on such purchases.
For example: You purchase a high end computer for music production. The ITC here will be a significant GST amount which you should use to set off against the payment liability of the output taxes.
So make sure you always buy goods and services for your professional jobs – with your GST details mentioned on the invoices, irrespective of the amount.
IMPORT OF GOODS / SERVICES
Any import of goods or services is subject to GST. Even downloading of software are is considered as an import, and here GST is applicable too. In such cases, the purchaser or receiver will be liable to pay GST on such imports.
If you are a musician or audio professional in India, feel free to email me your GST related queries on email@example.com