- Sakshar Law Associates
Art law and its tax implications in India
Updated: Sep 1, 2022
In many forms, India has been associated with its arts. The subcontinent has always been regarded for having artists of exceptional ability and ingenuity, dating back to our earliest civilization in the Indus valley. Each invader brought local traditions and design components with them, which local artisans integrated and combined into features of design that we now associate with the Indian subcontinent. The Indian art market, which includes artisans, weavers, and tribal and contemporary artists, is a $2 billion sector. Sixty percent of the work created by craftsmen is for the home market, while forty percent is sold worldwide. To export handmade creations, most craftsmen work with designers and buying firms, and they have very little control over pricing. The home market has shown a strong interest in handmade art in recent years. Brands have begun to concentrate on bringing old and dying crafts back to life. There are established galleries dealing in masters, modern art, photography, and other fine arts in all major cities, and they offer regular events for their fans, including educational activities. In the last five years, auction houses have grown in popularity as a means of acquiring artwork. These auction houses hold frequent sales and time their events to coincide with major holidays. Exclusive online auctions with a passionate turnout and substantial sales have been held in 2020. India has been particularly conscious about preserving indigenous art forms and ensuring that artists in distant areas of the country are supported. Each state has a handicraft emporium that buys works from local artisans and sells them in its retail stores. Both residents and tourists frequent these handicraft emporiums. They purchase works that are ethically sourced and have set pricing to protect the interests of craftspeople.
The tax implications of art law in India:
Every individual who is a buyer or a vendor has experienced conflicting feelings of hope and apprehension since the Good and Services Tax (GST) was implemented. While it has caused some people to endure sleepless nights, others have breathed a sigh of relief. Regardless of which category an organization falls into, the new indirect tax regime has impacted everyone in some way. GST is having an impact on a variety of businesses, including the arts. As a result, all art aficionados and collectors must be aware of the impact of this new indirect taxation policy on the art market. Though it has been nothing short of a celebration for a few sectors, the Indian art business has not fared as well. The policy, which went into effect at midnight on July 1st, 2017 has changed everything.
What is GST?
GST is one of the country's most significant indirect tax reforms since independence. GST is supposed to bring the various state economies together while also increasing the nation's overall economic growth. It is a comprehensive indirect tax applied at the national level on the manufacture, sale, and consumption of goods and services. It has left out any indirect taxes imposed by states and the federal government on goods and services. GST has been implemented in around 160 countries throughout the world. GST is a destination-based taxation system in which the state where the products are consumed collects the tax. From July 1, 2017, India introduced the GST and adopted the dual GST model, in which both the states and the central government levy taxes on goods and services, or both.
Taxes on Art prior to GST:
In various states, such as West Bengal, artworks such as pottery, folk paintings, and antiquities were taxed or exempted. Rajasthan had a very low VAT rate. Original engravings, prints, and lithographs were also only marginally taxed.
Taxes on Art post GST:
The GST Rate & HSN Code for Paintings, Decorative & Sculptures -Chapter 97 contains the defined GST rates for the art industry. The new tax policy has made it more difficult for Indian artists to find buyers by raising the price of their paintings. Paintings, pastels, drawings, original engravings, prints, and lithographs, statutory and original sculptures in any medium, and unique goods older than 100 years are all subject to this one taxation scheme. Only used or unused postage or revenue stamps, stamp-postmarks, first-day covers, postal stationery (stamped paper), and the like, as well as Numismatic coins, are subject to a 5% tax.
Art has always been a choice rather than a necessity. As a result, just 2-5 percent of the total artworks on show were sold in the past, and this number dropped even further when the GST regime was implemented. Original works of art are regarded as a luxurious possession rather than a necessary aspect of one's décor. Artworks are subject to a total tax of 12 percent. Apart from aggravating the already precarious state of the art industry, the government offers no specific incentives, initiatives, or programs to help it flourish.
Tax consideration for the act acquired internationally:
The customs duty on 'paintings, decoratives, and sculptures,' particularly 'paintings, drawings, and pastels, executed entirely by hand, other than drawings of heading 4906 and other hand-painted or hand-decorated manufactured articles; collages and similar decorative plaques,' is 10% per unit, according to the Customs Tariff Act 1975. (in kilograms). Furthermore, the Customs Tariff Act exempts from customs duty the import of "pieces of art created abroad – by Indian painters and sculptors, whether imported on the return of such artists or sculptors to India or imported by such artists or sculptors subsequent to their return to India."
Due to the effects of demonetization and GST on the worldwide stage, Indian artists have missed countless opportunities to showcase their abilities. This uniform taxation scheme, known as GST, has merely added to the pain of India's already ailing art industry. India is home to a diverse range of art styles and forms, which are practiced by Indians around the country. Artists' endowments are agnostic to religion, and an artist living in a remote or rural region sells his work for pennies on the dollar, and the new indirect tax regime has created complications for him. This is a serious threat to small-scale artisans' and artists' livelihoods.
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