Licensing Copyright in Cinematographic Films Is Classifiable Under SAC 997332 at 12% GST, Not as Information Technology Software at 18% — Bombay HC Quashes Rs. 80 Crore Demand Against Dharma Productions, Holds Orders Suffered From Jurisdictional Error

The Bombay High Court has quashed demand orders aggregating approximately Rs. 80 crores raised against Dharma Productions Pvt. Ltd. and Dharmatic Entertainment Pvt. Ltd., holding that the licensing of copyright in cinematographic films by the producer and original copyright holder is classifiable under SAC 997332 (Licensing services for the right to broadcast and show original films) under Heading 9973 at 12% GST, and not under SAC 998340 (Information Technology Software services) at 18%. The ruling by Justice M.S. Karnik and Justice Sandesh D. Patil in WP Nos. 2029 & 2184 of 2025 (decided 10.09.2026) held that the impugned orders suffered from jurisdictional errors apparent on the face of the record and did not require adjudication of disputed questions of fact, warranting exercise of writ jurisdiction despite the availability of the GSTAT remedy.

The dispute concerned the period from July 2017 to September 2021, when Entry 17(i) of the Rate Notification taxed licensing of IP rights in goods other than IT software at 12%, while Entry 17(ii) taxed IP rights in IT software at 18%. Post 01.10.2021, a uniform 18% was levied. The court held that the impugned orders did not deal with the statutory definition of ‘information technology software’ at all, and contained no finding as to how a cinematographic film — a passive audio-visual work incapable of execution, manipulation or interactivity — could satisfy that definition. The existence of separate SAC entries (997331 for computer software and 997332 for films) demolished the assumption that film licensing could be subsumed within software. The mode of delivery (hard disk or electronic link) was held irrelevant to classification, which must turn on the essential character of the supply.

The court rejected the respondent’s attempts to invoke the ‘OIDAR’ classification for the first time in the affidavit-in-reply (following Mohinder Singh Gill) and dismissed the reliance on the ‘Aspect Theory’ which operates in the field of legislative competence, not classification under a single statute. The CBIC’s own Circular No. 234/28/2024-GST regularising the dispute on an ‘as is where is’ basis was held to apply to the petitioner’s upstream transaction (producer to distributor) equally, as the classification of theatrical rights cannot change merely because the supplier is at a different point in the chain. The Prasar Bharati Office Memorandum classifying royalty payments to producers under SAC 997332 at 12% was noted for its persuasive value.

- 2026-juristway.com-2561-HC(Bombay)-GST  |  High Court of Bombay  |  WP Nos. 2029 & 2184 of 2025  |  10.09.2026