Art law and its tax implications in India
In many forms, India has been associated with its arts. The subcontinent has always been considered to have artists of exceptional ability and ingenuity, dating back to our earliest civilization in the Indus Valley. Each invader brought with them local traditions and design components, which local craftsmen integrated and combined into design features we now associate with the Indian subcontinent. The Indian art market, which includes artisans, weavers, and tribal and contemporary artists, is a $2 billion industry. Sixty percent of the work created by artisans is for the domestic market, while forty percent is sold worldwide. To export handmade creations, most artisans work with designers and buying companies, and they have very little control over pricing. The domestic market has shown strong interest in handmade art in recent years. Brands began to focus on reviving old and dying craftsmanship. There are established galleries dealing with masters, modern art, photography and other fine art in all major cities, and they regularly offer events for their fans, including educational activities. Over the past five years, auction houses have grown in popularity as a way to acquire works of art. These auction houses hold frequent sales and time their events to coincide with major holidays. Exclusive online auctions with passionate participation and substantial sales took place in 2020. India has been particularly keen to preserve indigenous art forms and ensure that artists from remote parts of the country are supported. Each state has a craft store that buys works from local artisans and sells them in its retail stores. Residents and tourists frequent these craft shops. They buy ethically sourced works and have set prices to protect the interests of artisans.
Tax implications of art law in India:
Every buyer or seller has experienced conflicting feelings of hope and dread since the introduction of the Goods and Services Tax (GST). While some people endured sleepless nights, others breathed a sigh of relief. Regardless of which category an organization falls into, the new indirect tax regime has impacted everyone in one way or another. The GST impacts a variety of businesses, including the arts. Therefore, all art lovers and collectors should be aware of the impact of this new indirect tax policy on the art market. Although it has been nothing short of a celebration for a few sectors, the Indian art trade has not fared so well. The policy, which took effect at midnight on July 1, 2017, changed everything.
What is the GST?
The GST is one of the country’s most important indirect tax reforms since independence. The GST is supposed to bring together the different economies of the states while increasing the overall economic growth of the country. It is a global indirect tax applied at the national level on the manufacture, sale and consumption of goods and services. It left out all indirect taxes imposed by the states and federal government on goods and services. GST has been implemented in approximately 160 countries around the world. GST is a destination-based taxation system in which the state where the goods are consumed collects the tax. As of July 1, 2017, India introduced GST and adopted the dual GST model, in which states and central government levy taxes on goods and services, or both.
Taxes on art before GST:
In various states, such as West Bengal, works of art such as pottery, folk paintings and antiques were taxed or exempt. Rajasthan had a very low VAT rate. Original etchings, prints and lithographs were also only marginally taxed.
Taxes on art after GST:
The GST Rate and HSN Code for Paintings, Decorations and Sculptures – Chapter 97 contains the GST rates set for the art industry. The new tax policy made it harder for Indian artists to find buyers by raising the price of their paintings. Paintings, pastels, drawings, original etchings, prints and lithographs, statutory and original sculptures in any medium and unique goods over 100 years old are all subject to this unique tax regime. Only used or unused postage or tax stamps, postmarks, first day covers, postal stationery (stamped paper), etc., as well as numismatic coins, are subject to a 5% tax.
Art has always been a choice rather than a necessity. As a result, only 2-5% of the total artwork on display was sold in the past, and this number fell further when the GST regime was introduced. Original works of art are considered a luxury good rather than a necessary part of decor. Works of art are subject to a total tax of 12%. Besides worsening the already precarious state of the industry, the government is not offering any specific incentives, initiatives or programs to help it thrive.
Tax counterpart of the act acquired internationally:
The customs duty on “paintings, decorations and sculptures”, in particular “paintings, drawings and pastels, executed entirely by hand, other than drawings of heading 4906 and other manufactured articles painted or decorated by hand; collages and similar decorative plates”, is 10% per unit, in accordance with the Customs Tariff Act 1975. (in kilograms). In addition, the Customs Tariff Act exempts from customs duties the importation of “works of art created abroad – by Indian painters and sculptors, whether imported on the return of such artists or sculptors in India or imported by such artists or sculptors after their return to India”. India.”
Due to the effects of demonetization and GST on the world stage, Indian artists have missed countless opportunities to showcase their abilities. This uniform taxation system, known as GST, has only added to the pain of India’s already struggling art industry. India is home to a wide range of styles and art forms, which are practiced by Indians across the country. Artist endowments are agnostic to religion, and an artist living in a remote or rural area sells their work for pennies on the dollar, and the new indirect tax regime has created complications for them. This is a serious threat to the livelihoods of small artisans and artists.