Vat and service tax on royalty invoices

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

25 November 2014 Dear Experts,

We are getting royalty for allowing usage of our name/trademark.

We raise royalty invoices for recovering royalty.

Now, please clarify: Which tax should we charge in the invoices: Gujarat VAT or Service Tax or both? I think, only one tax should be applicable.

Thanks in advance.

Annu Agarwal

Annu Agarwal (Expert)
Follow

25 November 2014 As per my view,if you are getting royalty for ony using your trademark /name AND the franchisee does not has the right to transfer or sub-let the trademark to a third party cannot be considered as "transfer of right to use".Therefore only service tax shall be charged on such royalty income.

Please refer the case of Kerala High Court, in Malabar Gold Private Limited versus commercial tax officer, Commissioner of Central Excise and Customs (2013-TIOL-512-HC-KERALA-ST)

Message likes : 1 times

Rupesh Jain

Rupesh Jain (Expert)
Follow

26 November 2014 only service tax applicable.

Message likes : 1 times

Upgrade to CAclubindia Pro. Subscribe Now!

Querist : Anonymous

Querist : Anonymous (Querist)

27 November 2014 Dear Experts, thank you so much.

I would like to add the following details in our case:

In our case, the transferee has the right to sub-let our trademark. So: (1) We recover royalty from transferee and (2) Our transferee recovers royalty from the company to who our transferee sub-lets the use of our trademark.

So, under such circumstances, let us please know which tax (VAT/Service tax/Both) would be applicable.

Regards.