Can a music label be taxed for promoting songs it already owns? A Supreme Court ruling in the matter could settle a long-running tax dispute over music rights and have wider implications for the entertainment industry.
The dispute reached the apex court after the Commissioner of CGST & Central Excise, Mumbai, on 14 July challenged a January ruling of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai. The tribunal had quashed a ₹5.54 crore service tax demand against Zee Entertainment Enterprises Ltd.
The appeal against Zee Entertainment is the second such case before the Supreme Court. In January 2025, the court had admitted an appeal against a similar CESTAT ruling involving Sony Music Entertainment India Pvt. Ltd. The tribunal had ruled iIndia Sony's favour in June 2024.
At the heart of both cases is a simple question: when a music label acquires the copyright to songs and is contractually required to advertise and promote them, is it providing a taxable service to the film producer?
The tax department says yes. It argues that music labels may acquire music rights from film producers, but their contractual obligation to advertise and promote the music amounts to a separate marketing service provided to the producers.
Music labels disagree. Once the copyrights are assigned, they say, they are promoting and exploiting their own intellectual property, not providing a service to the producer.
“In the music and entertainment industry, it is a standard commercial practice for producers to assign music rights in consideration of a minimum guarantee, coupled with obligations such as agreed marketing and promotional expenditure. Such marketing and promotional spends are contractual commitments undertaken by music labels as part of their own revenue generation and monetisation strategy,” explains Mitesh Jain, partner and tax practice lead, Dentons Link Legal.
Zee Entertainment declined to comment. Queries sent to Sony Music Entertainment India and the tax department remained unanswered till press time.
The tax fight
In June 2024, CESTAT ruled in favour of Sony Music, holding that a music label does not provide a taxable service to film producers by advertising and promoting songs after acquiring their copyrights.
The tribunal said the expenditure was incurred to commercially exploit the label's own intellectual property, rather than to provide a marketing service to the producer.
CESTAT followed the same reasoning in January 2026 when it granted Zee Entertainment identical relief and quashed the service tax demand. The tax department has now challenged both rulings before the Supreme Court.
The dispute stems from the pre-GST service tax regime under the Finance Act, 1994. But tax experts say a ruling in favour of tax authorities could influence the treatment of similar copyright assignment and promotional arrangements under the goods and services tax (GST).
“Labels could consequently face tax, interest and, depending on limitation and culpability, penalties for open service tax periods. Future agreements may require separate invoicing, valuation clauses, tax gross-ups and clearer delineation between rights exploitation and producer-facing promotion,” Rohit Jain, managing partner, Singhania & Co.
The impact could extend beyond music, experts said. The issue may arise in industries where marketing and promotional commitments are built into wider commercial agreements.
“The judgment could have ramifications beyond the music industry, affecting sectors such as franchising, trademark licensing, sports broadcasting, OTT content, technology licensing and merchandising, where contracts commonly include marketing and promotional obligations,” said Sachin Sharma, managing partner at KSV Tax Consultants.
Jain of Dentons Link Legal said the ruling could prompt music labels to revisit their commercial arrangements and contractual documentation to mitigate potential GST exposure. Businesses may also adopt a more conservative tax position, where feasible, to minimise litigation risks and provide greater certainty in tax compliance.
The two cases
The Zee dispute stems from the company's acquisition of music rights for the Shah Rukh Khan-starrer Raees. Under a 3 January 2017 agreement, Zee acquired the film's songs and sound recordings by paying a minimum guarantee and agreeing to spend ₹2.5 crore on advertising and promotion.
The tax department argued that the promotional obligations amounted to a taxable service provided to the film producer. It consequently raised a ₹5.54 crore service tax demand.
The Sony Music case involved similar copyright assignment agreements relating to films including Brahmāstra: Part One – Shiva and Toofaan. The department likewise argued that the contractual promotional obligations constituted a taxable service.