GST on Musical Sector

Abstract:  All musical instruments are now subject to a 28% tax under the new GST regime, making them unaffordable for middle-class music aficionados. Musical instruments, components, and accessories such as the piano, keyboard, harmoniums, drums, xylophones, mouth organs, and pipe organs are classified under HSN code chapter 92 in the GST commodity tariff schedule. Indigenous handcrafted musical instruments, on the other hand, are exempt from the new tax structure. While many industries rejoiced, the already suffering music business is concerned that the new tax policy will negatively impact the market, making it more difficult for struggling musicians to purchase artefacts. The 28 percent Goods and Services Tax (GST) on musical instruments, as well as the lack of clarity on which items are subject to the new tax, are causing outrage among musicians and store owners.

 1. Introduction 

The 28 percent goods and services tax (GST) on musical instruments, as well as the lack of clarity on which items the new tax applies to, are causing a stir among musicians and store owners. Previously, musical instruments were taxed at 14.5 percent in Karnataka and 5.5 percent across India. Music is seen as educative in other countries. Putting a 28 percent tax on instruments after the GST makes music a luxury.

While the post-GST price hike may not be significant, retailers have already begun to feel the effects. The tax increase has had an impact on entry-level items for aspiring musicians and new learners. A price increase of Rs 300-500 on fast-moving equipment like guitars and keyboards has resulted in a significant decline in sales. Since July 1, when the GST was implemented, the store’s sales have decreased by nearly 60%. It’s getting increasingly difficult for merchants to give any discounts to customers as their profit margins have shrunk. Customers’ discounts have decreased to around 5% from 12-15% previously.

A 28% tax is a disincentive as soon as one sees it. Music is a way of life for me and has helped me make a livelihood. However, I am unable to purchase a nice guitar, microphone, or amplifier. It has gotten much more tough now. Many individuals end up buying replacement parts or musical instruments from overseas because they are too expensive in India. If the government wants to encourage local companies and artists, it should make music cheaper. Businesses lose money as a result of this (28 percent GST).

There is also the question of instrument categorization. Handcrafted indigenous musical instruments are tax-free under the GST. Guitars and violins, on the other hand, even if constructed in India, come within the category of western instruments. There is a lot of misunderstanding as a result of this. However, in a few months, when the new tax laws are clearer, he anticipates prices to normalise and maybe even drop. Businesses would have to adjust their filing procedures as a result of the introduction of GST. Because of the lower import levies, pricing will be more consistent once fresh imports commence.

1.1 Scope and Objective of The Study:

i. To Analyse the concept of GST returns on Musical Sector.

ii. To examine the Impact of post GST on musical Instruments and their difficulties.

1.2 Review of Literature:

“Music is perceived to be educational abroad,” Siddharth Patwa, director of the Soundglitz music retail chain, stated. Instruments will be taxed at a rate of 28%, making music a luxury.[1]

“The objective appears to be to promote native instruments and local music,” M S Mani, a senior director at consultancy company Deloitte India, said. Handmade instruments built in the nation will be more costly than imported western instruments.[2]”

Tax officials, on the other hand, cautioned against granting multiple tax exemptions for domestic musical instruments. “While exempting indigenous musical equipment would definitely benefit in keeping the cost of these items low and giving a boost to their use, the design of GST is predicated on few exemptions and a larger base,” said Bipin Sapra, an indirect tax partner at consultancy company Ernst & Young. As further exemptions are granted, the rate on other goods will remain high.[3]”

The additional tax has deterred beatboxer and vocalist Vineeth Vincent. When one sees a 28% tax, it becomes a disincentive. “Music is a way of life for me and has helped me make a livelihood,” she says. However, I am unable to purchase a nice guitar, microphone, or amplifier. It has gotten much more tough now.”[4]

1.3 Research Problem

When one sees a 28% tax, it becomes a disincentive. Music is a way of life for us, and it has helped us make a livelihood. However, many folks cannot afford a nice instrument, microphone, or amplifier. It has gotten much more tough now. Many individuals end up buying replacement parts or musical instruments from overseas because they are too expensive in India. If the government wants to encourage local companies and artists, it should make music cheaper. Businesses lose money as a result of this (28 percent GST). There is also the question of instrument categorization. Handcrafted indigenous musical instruments are tax-free under the GST. Guitars and violins, on the other hand, even if constructed in India, come within the category of western instruments. There is a lot of misunderstanding as a result of this.

1.4 Hypothesis

Musical fans were troubled about the high tax rates on musical instruments, that have almost doubled if someone likes to play the Spanish or Hawaii guitar. It’s interesting that users of damru or dhol won’t have to pay taxes, but some of those acquiring a set of drums would also have to pay 28 percent GST. The musical profession, on the other hand, is not profiting from the new tax structure.

1.5 Research Questions

The researcher seeks to answer the following question:

i. What are the consequences of GST for other Music Equipment and Accessories?

ii. What Musical Instruments are Taxed at 28% GST?

iii. Whether Impact of GST on Musical Instruments is Boon or Bane?

1.6 Research Methodology

The researcher has adopted the Article to carry out the research and used the historical, analytical and critical methods of data interpretation. The primary sources of data and secondary sources of data include books and articles published in journals and websites.

2. Instrument for Musical Performance

Any equipment that produces a musical sound is referred to as a musical instrument. Percussion, stringed, keyboard, wind, and electronic instruments are the most common forms of such instruments, grouped by the technique of sound production. Pipes and whistles were discovered in the Paleolithic Period, and clay drums and shell trumpets were discovered in the Neolithic Period, according to archaeology. It has been proved that the ancient city civilizations of Mesopotamia, the Mediterranean, India, East Asia, and the Americas all had diversified and well-developed musical instrument collections, implying that there must have been a long period of development. However, there can be no certainty about the origins of musical instruments. Some scholars have speculated that the first instruments were derived from such utilitarian objects as cooking pots (drums) and hunting bows (musical bows); others have argued that musical instruments may well have preceded pots and bows; and the origin of music has frequently been attributed to the gods in myths from cultures all over the world, particularly in areas where music appears to have been regarded as an essential component of the ritual believed necessary.

Whatever their origins, the world’s vast array of instruments have been shaped by the interaction of four factors: accessible material, technological skills, mythological and symbolic preoccupations, and commerce and migratory patterns. Dwellers of Arctic areas make instruments out of bone, skin, and stone; residents of the tropics employ wood, bamboo, and reed; and cultures with access to metals and the necessary technology may use these malleable materials in a number of ways. Myth and symbolism both play a significant influence. Herding societies, for example, which may depend on a particular species of animal not only economically but also spiritually, often develop instruments that look or sound like the animal or prefer instruments made of bone and hide rather than stone and wood, even when all the materials are available. Finally, patterns of human trade and migration have for many centuries swept musicians and their instruments across seas and continents, resulting in constant flux, change, and cross-fertilization and adaptation.

Many elements can influence the sound produced by an instrument, including the material used in its construction, its size and form, and how it is played. A stringed instrument, for example, can be hit, plucked, or bowed, each providing a different sound. Even though the two instruments are otherwise similar, a wooden instrument hit by a beater sounds very different from a metal instrument. A flute constructed of metal, on the other hand, does not make a sound that is significantly different from one made of wood, because the vibrations in this case are in the instrument’s air column. Other elements, such as the length and geometry of the tube, influence the timbre of wind instruments. The length of the tube influences not just the pitch but also the timbre: the piccolo has a shriller sound than the flute since it is half the size. The presence or absence of the “upper partials”[5] (harmonic or nonharmonic overtones) that provide colour to the single note is determined by the tube shape.

3. Effect of GST on Music Instruments and Industry

The introduction of the Goods and Services Tax (GST) regime is unquestionably a positive move for the country’s overall economic growth. However, other companies, such as the music industry, are not benefiting from the new tax system. Let’s take a deeper look at how GST affects musical instruments and the music business.

In order to encourage domestic instruments, Western musical instruments are classified in a higher slab rate category, i.e., 28 percent, under the Goods and Services Tax Regime. According to the GST Council’s most recent meeting, the newly established GST imposes a 28 percent tax rate on western musical instruments such as the piano, modest mouth organ, guitar, and saxophone. The Sitar, on the other hand, is free from the new indirect tax structure. Store owners and artists, on the other hand, have been harmed by the 28% GST charge on western musical equipment. Apart from them, the new tax scheme does not impose any tax rates on domestic handcrafted instruments.

Previously, several states, such as Karnataka, imposed up to 14-14.5 percent value added tax (VAT) on musical instruments, whereas domestically produced musical instruments were taxed at 5.5 percent GST.[6]

Musical enthusiasts have been concerned about the high tax rates on musical instruments, which have virtually doubled if one wishes to play the Spanish or Hawaiian guitar. It’s odd that consumers of damru or dhol won’t have to pay taxes, but those buying a set of drums would have to pay 28 percent GST.

The government has chosen to exclude or charge a low tax rate on commonly used household musical instruments, particularly those accessible on the domestic market. While music equipment purchased outside of the United States will be classified as luxury goods and subject to a tax rate of 28% under the GST.

The government took a step by imposing a zero charge or nil tax rate on some handcrafted musical instruments in order to avoid artisans from having to file and pay GST, especially when a lot of items are acquired from the unorganised sector. Apart from this, a variety of handcrafted musical instruments are produced in home nations that do not wish to deal with complex regulatory regulations.

4. Return of GST on Musical Instruments

Last year, when the new tax law went into effect, it included all musical instruments. For tax purposes, musical instruments were classified into two groups. All indigenous and handcrafted instruments are included in the first category. There are no taxes on them. All other types of musical appliances and parts are subject to a 28 percent GST charge. While the categorization was supposed to make the procedure easier, it instead caused additional uncertainty. For example, even though a guitar is built in India, it is subject to taxation since it is classified as a western instrument. It is difficult to tell what is genuinely homemade and indigenous. As a result, keep track of the instruments that are taxed under GST; we have included a list below.

4.1. Musical Instruments are Subject to A 28% GST

i. Drums, maracas, cymbals, xylophones, and castanets are all examples of percussion instruments.

ii. Pianos and stringed instruments, such as the harpsichord. There are also pianos that play themselves.

iii. All musical instruments, such as the accordion and organs, that use electricity to generate or enhance sound.

iv. Harps, guitars (including electric), and violins are all string instruments.

v. All wind-powered musical instruments, such as bagpipes, keyboard pipe organs, clarinets, and trumpets.

More information on the impact of GST on musical instruments may be found here. Mechanical street organs, singing birds, musical boxes, whistles, carnival organs, and call horns are all subject to the GST at a rate of 28 percent. All of these musical instruments’ parts, as well as any accessories, are taxed. This list includes the following items:

i. mechanisms for musical boxes

ii. cards, discs, and rolls

iii. metronomes

iv. tuning forks

v. pitch pipes

Prior to the introduction of GST, the tax on a musical instrument, whether produced in India or overseas, was not prohibitively expensive. In Karnataka, for example, the figures were 5.5 percent and 14.5 percent, respectively. The sector has taken a hit as a result of the significant increase in GST on various musical instruments. Amateurs and students of music are hesitant to purchase instruments since even a five-hundred-rupee price increase is too much for them. As a result of the lack of sales, merchants’ businesses suffered. To compensate for the reduction in sales, the discounts on offer have been considerably cut. While a 15 percent discount was possible before GST, today’s musical instrument stores only provide a 5 percent discount.

The GST exemption for indigenous instruments was intended to help local businesses and artists learn them. The initiative was good, but because music is both an art form and a means of education, treating it as a luxury item by imposing a 28 percent tax may not produce the desired results. GST has had a negative impact on the economy. Individuals are acquiring musical instrument components abroad rather than in India since the cost is lower.

4.2.The GST For Other Music Equipment And Accessories

CDs, tapes, DVDs, and USBs are only subject to 18% GST. Smart cards and other solid-state non-volatile storage devices are in the same boat. Any medium used to record sound, video, or any other phenomenon is subject to an 18% tax.

i. Sound recorders, sound re-producers, and headphones are all subject to GST under Chapter 85. All these devices and apparatuses, like most musical instruments, are subject to a 28 percent tax.

ii. Amplifiers, loudspeakers, and radios (both audio-frequency and electric-sound), as well as other audio equipment, is subject to a 28 percent GST. It makes no difference if radios are paired with sound recording technologies, clocks, or sound reproduction in the case of radios. Because they are classified as “receiving device for radio transmission,”[7] they are all taxed at the same rate.

5. Conclusion

As a result, we had a thorough discussion regarding the impact of GST on the musical industry. While exempting indigenous musical equipment would help keep the cost of these goods low and encourage their use, the GST is designed with few exemptions and a larger base. The higher the exemptions, the higher the rate on other goods will remain. The government has chosen to exclude or charge a low tax rate on commonly used household musical instruments, particularly those accessible on the domestic market. While music equipment sourced from the unorganised sector will be classified as luxury goods and will be taxed at a rate of 28 percent under GST. The government has taken the step of levying a zero levying or nil tax rate on some handmade musical equipment to keep artisans from having to file and pay taxes under GST. Apart from this, a variety of handcrafted musical instruments are produced in home nations that do not wish to deal with complex regulatory regulations.

6. References

[1] Subodh Kumawat,”Impact of GST on Musical Instruments And Industry”,blog.saginfotech, Sep 13, 2017, available at https://blog.saginfotech.com/gst-impact-musical-instruments-industry. (assessed on 13^thNov 2021).

[2] ibid

[3] ibid

[4] Ipsita Basu, ET Bureau, With GST, musical instruments to cost more,The Economic Times, Jul 11, 2017,available at, https://www.sudeepaudio.com/saundcheck/gst-for-music-business-part1/. (assessed on 14^th Nov2021)

[5] Westrup etal, “musical instrument”, Encyclopaedia Britannica, 27 Nov. 2020, available at https://www.britannica.com/art/musical-instrument(Accessed on 13 November 2021).

[6] Supra note No: 1

[7] Impact of GST on Musical Instruments,Thedrumcartel,Jul29,2019,available at https://www.thedrumcartel.com/impact-of-gst-on-musical-instruments/(assessed on Nov14,2021)