GST on Royalty payment to Authors

In this article, we will discuss the applicability of GST on the payments made by the publishers towards royalty to authors. We will discuss whether Reverse Charge Mechanism is applicable on royalty payment to authors or not in the light of prevailing GST laws in India. Let’s start…

Before we start our discussion, it is first important to understand the meaning of “Reverse Charge Mechanism”.

Reverse Charge Mechanism

As per Section 2(98) of the CGST Act, 2017, “Reverse Charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act;

Section 9(3) of the CGST Act, 2017 empowers the Central Government, on the recommendations of the Council, to specify categories of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both. If any goods or services are notified by the Government u/s 9(3), then all the provisions of the Act shall apply to the recipient as if he is liable for paying the tax in relation to such goods or services or both.

RCM on services provided by authors

The Central Government has issued Notification No. 13/2017 dated 28^th June 2017 in exercise of powers granted u/s 9(3) of the CGST Act to notify goods or services on which RCM shall be applicable. Supply of services by authors has also been notified under this notification as below:

Thus, if an author (Indian or Foreign) provides the services by way of supply of transfer or permitting the use of enjoyment of a copyright to a publisher located in territory of India, the recipient of services i.e. publisher shall be liable to pay GST under reverse charge mechanism.

Now, a question arises that “Can an author opt to pay GST under forward charge on his/ her services to a publisher?”.

The Answer is “YES”

The Central Government made an amendment in the above notification through Notification No. 22/2019- Central Tax (Rate) dated 30^th September, 2019.

According to this notification, in case the author wishes to pay tax under forward charge he shall follow the following:

• He shall take registration under the GST and
•  He shall file a declaration in Annexure-I with the jurisdictional CGST or SGST commissioner that he exercises the option to pay GST on the services rendered by him under forward charge.
• This declaration is to be filed for each financial year before the commencement of the financial year for which the option is to be exercised.
• The option cannot be withdrawn within a period of 1 year from the date of exercising such option.
• Also, the author shall make a declaration, as prescribed in Annexure-II on the invoice issued by him in Form GST INV-I to the publisher.

Note: In case the author exercises option to pay tax under forward charge, the publisher shall not be liable for GST under reverse charge mechanism on the aforesaid supply by the author.

Download format of Annexure II in PDF from attachments

Conclusion: Supply of services by an author by way of transfer or permitting the use or enjoyment of a copyright is liable under RCM on which the GST shall be paid by the publisher located in the territory of India. But in case the author exercises option in Annexure-I, the author shall be liable to pay tax under forward charge mechanism.

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Annexure II

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