Taxing Cross-Border Production Activities – Contract Language Re-Emphasized

• Line producer not an intermediary - held to be providing services on a principal to principal basis
• Costs paid to pure agent for procurement of goods and services to be part of service fees of pure agent if the invoices for such goods and services are in the name of the pure agent
• Services provided by Indian line producers to offshore clients may qualify as GST free export of services

A recent tax ruling¹ by the West Bengal Authority for Advance Rulings (AAR) has interesting takeaways for Indian film producers that wish to appoint offshore line producers / producers.

Following the introduction of the Goods and Services Tax (GST) in India, tax authorities and courts have increasingly relied on the wording of key contract terms to tax cross-border supplies of goods and services. The ruling has re-emphasized the need to have robust contractual terms in place to mitigate tax risks arising from a potential re-characterization of transactions by tax authorities