GST on Royalty from Music Rights
This query is : Resolved
12 April 2023
Assessee has a music label brand & it generates a royalty from IPRS on the basis of songs played on various platforms. The said amount are in transfered as royalty based on the no of times the songs have been played for a particular time.
Is GST applicable on the said amount received or the same will be paid by the IPRS on RCM basis.
The music label is registered under GST as it has other business verticals as well.
Is GST applicable on the said amount received or the same will be paid by the IPRS on RCM basis.
The music label is registered under GST as it has other business verticals as well.
13 April 2023
According to my Knowledge Supplies liable to RCM is notified and above mentioned service isnt covered under the same . So GST has to be charged on Forward Charge Mechanism and Rest need to read the Royalty Agreement for better clarity
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14 April 2023
GST will be applicable at the rate of 18% on royalty amount under RCM basis.
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14 April 2023
https://taxguru.in/goods-and-service-tax/applicability-rcm-royalty-paid-authors.html
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13 July 2023
So whether RCM is applicable or not on such receipts of royalty?
Also which HSN code to be used for the same
Also which HSN code to be used for the same
27 July 2024
GST applicability on royalty payments for music rights, such as those received from IPRS (Indian Performing Right Society), can be a bit complex. Here's a detailed explanation based on the current GST provisions:
### **1. **GST on Royalty from Music Rights**
**A. **Nature of Royalty:**
- **Music Rights:** The royalty received by a music label for the use of its music rights, such as the number of times songs are played, is considered a payment for intellectual property rights.
**B. **GST Applicability:**
- **Royalty Payments:** Royalties for music rights fall under the category of "intellectual property rights" and are subject to GST.
- **GST Rate:** As per **Notification No. 11/2017-Central Tax (Rate)**, the supply of intellectual property rights is taxed at **18% GST**.
### **2. **Reverse Charge Mechanism (RCM) Applicability**
**A. **Reverse Charge Mechanism:**
- **General Rule:** Under the reverse charge mechanism (RCM), the recipient of certain services is liable to pay GST.
- **Notification Reference:** The reverse charge mechanism under GST does not generally apply to royalty payments received by the music label from IPRS. Instead, it is the responsibility of the music label to charge and pay GST on such royalty receipts.
- **Relevant Notification:** **Notification No. 13/2017-Central Tax (Rate)** lists out the services subject to reverse charge, but royalties from intellectual property rights (such as music rights) are typically not included under RCM for the recipient.
### **3. **HSN Code**
**A. **HSN Code for Royalty:**
- **HSN Code for Intellectual Property Rights:** For royalty related to intellectual property rights, including music rights, the relevant HSN code is:
- **HSN Code 9973**: This code covers “Other professional, technical and business services” and can be used for services related to intellectual property rights, including royalties.
### **4. **Accounting and Compliance**
**A. **Invoice and GST Reporting:**
- **GST Collection:** The music label should issue a GST-compliant invoice for the royalty payments received. The invoice should mention the GST rate (18%) and the GST amount.
- **Reporting in Returns:** The GST collected on royalty payments should be reported in GSTR-1 and paid through GSTR-3B.
**B. **Input Tax Credit (ITC):**
- **Claiming ITC:** If the music label incurs GST on inputs related to generating royalties, it can claim ITC on those inputs as per the GST provisions.
### **Summary**
1. **GST on Royalty:** Royalty received from music rights is subject to 18% GST.
2. **Reverse Charge:** RCM does not generally apply to royalty payments received by the music label from IPRS. The music label is responsible for charging and paying GST.
3. **HSN Code:** Use **HSN Code 9973** for reporting royalties related to intellectual property rights.
4. **Compliance:** Issue GST-compliant invoices, report GST in returns, and claim ITC where applicable.
### **References**
- **Notification No. 11/2017-Central Tax (Rate):** Covers the GST rate on intellectual property rights.
- **Notification No. 13/2017-Central Tax (Rate):** Lists services under reverse charge mechanism.
- **Section 9(3) of the CGST Act, 2017:** Deals with reverse charge provisions.
For accurate compliance and to address specific scenarios or changes in regulations, consulting a GST professional or tax advisor is recommended.
### **1. **GST on Royalty from Music Rights**
**A. **Nature of Royalty:**
- **Music Rights:** The royalty received by a music label for the use of its music rights, such as the number of times songs are played, is considered a payment for intellectual property rights.
**B. **GST Applicability:**
- **Royalty Payments:** Royalties for music rights fall under the category of "intellectual property rights" and are subject to GST.
- **GST Rate:** As per **Notification No. 11/2017-Central Tax (Rate)**, the supply of intellectual property rights is taxed at **18% GST**.
### **2. **Reverse Charge Mechanism (RCM) Applicability**
**A. **Reverse Charge Mechanism:**
- **General Rule:** Under the reverse charge mechanism (RCM), the recipient of certain services is liable to pay GST.
- **Notification Reference:** The reverse charge mechanism under GST does not generally apply to royalty payments received by the music label from IPRS. Instead, it is the responsibility of the music label to charge and pay GST on such royalty receipts.
- **Relevant Notification:** **Notification No. 13/2017-Central Tax (Rate)** lists out the services subject to reverse charge, but royalties from intellectual property rights (such as music rights) are typically not included under RCM for the recipient.
### **3. **HSN Code**
**A. **HSN Code for Royalty:**
- **HSN Code for Intellectual Property Rights:** For royalty related to intellectual property rights, including music rights, the relevant HSN code is:
- **HSN Code 9973**: This code covers “Other professional, technical and business services” and can be used for services related to intellectual property rights, including royalties.
### **4. **Accounting and Compliance**
**A. **Invoice and GST Reporting:**
- **GST Collection:** The music label should issue a GST-compliant invoice for the royalty payments received. The invoice should mention the GST rate (18%) and the GST amount.
- **Reporting in Returns:** The GST collected on royalty payments should be reported in GSTR-1 and paid through GSTR-3B.
**B. **Input Tax Credit (ITC):**
- **Claiming ITC:** If the music label incurs GST on inputs related to generating royalties, it can claim ITC on those inputs as per the GST provisions.
### **Summary**
1. **GST on Royalty:** Royalty received from music rights is subject to 18% GST.
2. **Reverse Charge:** RCM does not generally apply to royalty payments received by the music label from IPRS. The music label is responsible for charging and paying GST.
3. **HSN Code:** Use **HSN Code 9973** for reporting royalties related to intellectual property rights.
4. **Compliance:** Issue GST-compliant invoices, report GST in returns, and claim ITC where applicable.
### **References**
- **Notification No. 11/2017-Central Tax (Rate):** Covers the GST rate on intellectual property rights.
- **Notification No. 13/2017-Central Tax (Rate):** Lists services under reverse charge mechanism.
- **Section 9(3) of the CGST Act, 2017:** Deals with reverse charge provisions.
For accurate compliance and to address specific scenarios or changes in regulations, consulting a GST professional or tax advisor is recommended.
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