Ours company is engaged in manufacturing of Auto parts. We avail services w.r.t to design and drawing through mail for a foreign company which has no existence in India. Even that foreign company do not come to India for providing its technical support. We also do not use its brand name. The final products are sold in our brand name only.
Understanding with the Foreign Company:
We have to pay as Royalty @ 2% on the basic sales price of the product which are manufactured by using its design and drawing.
My Query:
1. Is the payment of Royalty attract Service Tax? 2. If yes, then what is its procedure to be followed? 3. Can the service tax if so charged be availed as MODVAT Credit?
Your earlier response to this will be highly appreciable.
CAclubindia
