Actors, producers get notice over tax payment

Notices have been sent to nine producers and actors to seek distribution agreement details

The Directorate General of Central Excise Intelligence (DGCEI) has sought distribution agreement details from top Bollywood producers and actors under Section 44 of the Service Tax Act.

The notices were sent to nine producers and actors - Salman Khan, Aamir Khan, Akshay Kumar, Yash Raj Films, Ranveer Singh, Aishwarya Rai Bachchan, Bhansali Productions, Zoya Akhtar and Reema Kagti.

"We have sent letters of enquiry under Section 14 of Service Tax Act and Section 83 of the Central Excise Act, and asked them to furnish details of distribution agreement, satellite rights and proportion of stake in films," a senior DGCEI official told Business Standard.

Actors are liable to pay service tax as the services provided by the actor come under consideration; the services are defined as activities carried out by a person for another for consideration and include a declared service, according to the prescribed provisions of the Service Tax Act, explained the official quoting the law.

"We have asked for project/film-wise information. More names can get added on the enquiry list depending on the information we get from our intelligence," added the DGCEI official. Typically, the profit earned by a film has to be split between the exhibitors, the distributors and the producers. However, some big stars stake a claim in the profit, which in some cases could go as high as 50 per cent depending upon the popularity of the actor.

"Such distribution models are mutually signed between the actor and the producer of the film. Instead of cash and cheques, actors these days prefer taking a stake in the profit earned," he said. Adopting this business model could provide actors enough room to evade tax or to hide income, said the official.

All of them have been given about three weeks to furnish the details.

Akshay Kumar is said to have provided the information sought and officials are examining it. If details are not provided, the department can issue summons for non-compliance.