‘Intellectual property right’ has not been defined in the Act. The phrase has to be understood as it is understood in normal trade parlance as per which intellectual property right includes the following –

• Copyright

• Patents

• Trademarks

• Designs

• Any other similar right to an intangible property

Temporary transfer or permitting the use or enjoyment of any intellectual property rights like Copyright, Patents, Trademarks, Designs, or any other similar right to an intangible property, whether or not registered outside India would be a declared service and would attract the Service Tax levy. If the place of provision of service of temporary transfer of intellectual property right is in taxable territory only then the liability of Service tax will arise.

Entry 15 of Exemption Notification no 03/2013 dated 01.03.2013 exempts temporary transfer or permitting the use or enjoyment of a copyright covered under clauses (a) or (b) of sub-section (1) of section 13 of the Indian Copyright Act, 1957 (14 of 1957), relating to original literary, dramatic, musical, artistic works or cinematograph films, shall be exempt from Service Tax.

(a) covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 (14 of 1957), relating to original literary, dramatic, musical or artistic works; or

(b) of cinematograph films for exhibition in a cinema hall or cinema theatre;”;

Provisions of Section 13 of The Indian Copyright Act, 1957:

As per section 13(1) of the said Act, copyright shall subsist throughout India in the following classes of work, that is to say,

(a) original literary, dramatic, musical and artistic work,

(b) cinematograph films; and

(c) sound recording

Note: out of above, copyright falling under category (a) is specifically kept out of service tax net.,

Departmental Clarification on scope [D.O.F. No.334/1/2010-TRU, dated 26-02-2010]

► Cinematographic film: A cinematographic film means any work of visual recording on any medium produced through a process from which a moving image may be produced. The same may be accompanied with sound reproduction also.

► Sound Recording: Similarly, song, its music, lyrics and composition also enjoy the copyright protection to its owner who can commercially exploit it in the manner stated above. Normally, the copyright of music vests in the composer and the copyright of music recorded vests in the producer of the sound recording. It is possible that a lyricist or a singer may hold copyright for the words of a song or the song itself

► Allowing the song to be recorded- Not liable to service tax: Merely allowing that song to be recorded is a copyright, which would fall under category (a) of section 13(1) of the Copyright Act and thus would not be subject to Service Tax.

Is the IPR required to be registered in India? Would the temporary transfer of a patent registered in a country outside India also be covered under this entry?

Since there is no condition regarding the law under which an intellectual right should be registered, temporary transfer of a patent registered outside India would be covered in this entry. However, it will become taxable only if the place of provision of service of temporary transfer of intellectual property right is in taxable territory.

Will a music company having the copyright for any sound recording be taxable for his activity of distributing music?

Temporary transfer of a copyright relating to original literary, dramatic, musical, artistic work or cinematographic film falling under clause (a) of sub-section (1) of section 13 of the Indian Copyright Act, 1957 is exempt. A music company would be required to pay service tax as the copyright relating to sound recording falls under clause (c) of sub-section (1) of section 13 of the Indian Copyright Act, 1957.

I am a composer of a song having the copyright for my song. When I allow the recording of the song on payment of some royalty by a music company for further distribution, am I required to pay service tax on the royalty amount received from a music company?

No, as the copyright relating to original work of composing song falls under clause (a) of sub-section (1) of section 13 of the Indian Copyright Act, 1957 which is exempt from service tax. Similarly an author having copy right of a book written by him would not be required to pay service tax on royalty amount received from the publisher for publishing the book. A person having the copyright of a cinematographic film would also not be required to pay service tax on the amount received from the film exhibitors for exhibiting the cinematographic film in cinema theatres.

What would be the liability of service tax on various arrangements entered into for screening of cinematographic films by producers/distributors/exhibitors?

A detailed circular has been issued by the Board dealing with various arrangements in the context of existing present system of taxation based on positive list of services vide Circular No. 148/17/2011 -ST, dated 13.12.2011 issued from. The said circular may be referred for the guidance. However, no service tax is payable on temporary transfer of copyright in relation to cinematographic films for exhibition in a cinema hall or cinema theatre as the same is exempt under the mega-Notification 03/2013.

       Notification No 25/2012 dated 20.06.2012 - Exemption Notification

 Taxation of Services - An Education Guide dated 20.06.2012