Maharashtra to end tax on film rights transfer

Mumbai, Dec 19 (IANS) The Maharashtra government will soon scrap the value-added tax (VAT) applicable when Bollywood producers temporarily transfer copyrights of their films.

Chief Minister Vilasrao Deshmukh assured film producers to relieve them of the additional tax burden when a delegation of Indian Motion Picture Producers Association (IMPPA) met him last Friday in Mumbai. Maharashtra is the only state in India which imposes VAT on this.

With the advent of electronic technologies, producers now possess about a hundred different copyrights on their films. This has provided them new earning avenues. They are no longer solely dependent on theatre releases to earn from their productions.

The most lucrative of these rights are television, satellite and DVD. Except for music rights, which they sell outright to the music companies, producers part with other copyrights only for a limited period. After expiry of the period, the rights revert back to them.

The state's sales tax department held that when producers parted with the copyrights on their films, they effectively 'sold' the rights, thus attracting VAT. Producers, on the other hand, contended that unlike music rights, they did not sell outright the other rights of their films and so imposing VAT on such transfer agreements was unjustified.

IMMPA president T.P. Agarwal said that Bollywood filmmakers, especially individual producers, already weighed down by multiple taxes at various stages of filmmaking, have been feeling the pinch of this additional tax.

'At four percent of the cost of the rights agreement of each film, each time a producer is required to shell out several hundred thousands of rupees by way of VAT,' Agarwal told IANS.

Corporate houses that have entered the film industry have been not as vociferous in their demand for removal of VAT from rights transfer.

The IMMPA delegation informed Deshmukh that while each rupee spent on making films count to the individual producers as they make films on borrowed money, the corporates are flush with public money.

'Therefore it matters little to them if they have to pay a little extra by way of VAT,' one of the IMMPA delegates who attended the meeting told IANS.