Service tax dept knocks on Bollywood’s door

The service tax department has plans to net revenue from Bollywood. It has sent notices to all production companies for details on every professional they’ve hired to work on their films since 2006, and who is not an employee of the company.

That means everyone from choreographers and music composers to sound engineers and cinematographers. Professionals whose yearly income crossed Rs10 lakh will have to pay this tax.

“They have only started communication with the companies. The process of getting details will take a while. And a few more months to get in touch with everyone on the list. Then everyone’ll have to pay up within a stipulated period,” says Mehul Sheth, a service tax consultant.

Film production companies who spoke to DNA confirmed the communication from the service tax department. “I heard about it the first time at a recent anti-piracy meet held between producers. I checked with my finance department and they said they have received it,” says Shailendra Singh, managing director of Percept Picture Company.

Will actors be included in this bunch? Technically, yes, but the definition of a qualified professional is so vague that it cannot be too difficult for anyone smart enough to slip through the loopholes, says Sheth. Anybody providing any form of technical service becomes liable. So while technically qualified cinematographers, editors, sound engineers and so on clearly fit the definition, actors do not.

“But stars like Amitabh Bachchan and Shah Rukh Khan are already paying tax for the service they provide in their endorsements. Whether they will be taxable further for their films is debatable,” says Sheth.

Cinematographer Ayananka Bose, who worked on Dostana and Tashan in the past and is currently working on Kites, says that he found out about the service tax from a colleague a while ago. “He had included the service tax in the bill that he presented to the production company for the services rendered,” says Bose, adding that very few technicians, like himself, are aware of the fact that they have to pay a service tax.

Any technician with decent credentials in the industry easily earns over Rs10 lakh a year. “The fact that a lot of us will have to now pay tax on wealth accumulated over the past three years may throw savings plans of many out of gear,” says Bose.