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Food Brands countrywide are abandoning their registered Trademarks to avoid 5%Trademark Tax imposed under the GST.

With the advent of the new uniform tax regime called the Goods and Services Tax (GST) from 1st July, the tax rates stands revised. The entire range of goods and services are categorized across six different tax rates.

However, the catch is for certain food grains like barley, cereals, corns, flour, pulses, oats, rice, rye, seeds and wheat products would be penalized with an additional GST charge of 5%, if sold in branded packaging.

# Scope of the phrase 'Registered Brand Name.'

Products having a branded packing or bears a registered brand name or a trade name comprises of,

  • a name 
  • a mark like a symbol, monogram, label or signature
  • invented word

used to distinguish a specific good and indicating an association in the course of trade between the person and such marks, and is registered under the Trade Mark Act,1999.

# Scope of 'Trademark Tax'

This 5% GST is commonly being referred as the 'Trademark Tax'. It is applicable for:

  • Indian and foreign companies which sell goods in India
  • Have brands registered under the Trademark Act,1999
  • Levied against some specified food grains.

# The Impact Of Trademark Tax

Many instances were reported in which food traders have attempted to give-up Trademark registration and are selling unbranded products to evade taxes.

Certain cases reported are:

  • In Kalaburagi, a red-gram growing district, there were only 6 out of 250 Dal mills which were registered under the Trademarks Act, are now de-registered.
  • In Tungabhadra, around 400 mills stopped selling rice under registered brand.

Is it really making such a huge difference in cost?

Some argue that the additional cost incurred in maintaining the quality standards revises the cost portion to almost 15% compared to unbranded products.

However, what most Food traders fail to understand is that the benefits of the Trademark will outrun the tax outlay. Registered brand not only protects your brand from copying, rather helps in capturing a market share and creates customer loyalty.

# Rational Behind Imposition of Trademark Tax

According to the government, their connotation behind such imposition was

  • It is imposed on a narrow section of products.
  • The rural population source such food products from subsidized public distribution shops, which mostly retail unbranded food products in plain packing.
  • Branded products are channelized towards the urban end.

The words 'Registered under the Trademark Act,1999' is bringing all the analogy if removed, then all branded goods, registered or unregistered will be treated on the same footing.

There is always an option to appeal the GST Council and put forth such concerns in the regular meetings conducted or through their online portal.

The author has an unleashed zest for everything creative. Is a budding writer, inspired from coffee beans to pen down, when the world sleeps. Affiliated with QuickCompany which deals in Company Registration, Trademark registration, Trademark Public Search, MSME, Import -Export Code and Other Legal Activities.


Published by

Nimisha Gupta
Category GST   Report

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