Franchise of pre school
This query is : Resolved
16 June 2015
we are providing franchise of pre school so service tax is applicable.
17 June 2015
Pre School Business providing franchise so on that income service tax applicable.
25 July 2024
Yes, service tax (now GST) is applicable on the income derived from providing franchise services for a pre-school business. Here’s a breakdown of how it applies:
### Understanding Franchise Services:
When you provide a franchise for a pre-school business, you are essentially granting another party the right to use your brand name, business model, curriculum, and other intellectual property. In return, the franchisee pays you a fee or royalty.
### Applicability of Service Tax (GST):
Under the Goods and Services Tax (GST) regime in India:
1. **Nature of Service**: Franchise services fall under the category of "business support services." The service tax or GST is applicable on such services.
2. **Taxable Event**: The taxable event for service tax or GST occurs when the services are provided or when the invoice for the services is issued, whichever is earlier.
3. **Registration**: If the annual aggregate turnover of your franchise services exceeds the threshold limit prescribed under GST law (which is typically ₹20 lakhs for most states, ₹10 lakhs for special category states), you are required to register for GST.
4. **Tax Rate**: The applicable GST rate depends on the nature of services provided. As of now, educational services and related services are generally taxed at 18% GST rate, subject to specific exemptions or notifications.
### Compliance Requirements:
To comply with GST regulations:
- **GST Registration**: Obtain GST registration if your aggregate turnover exceeds the threshold limit.
- **Tax Invoicing**: Issue proper tax invoices for the franchise fees charged to your franchisees.
- **GST Payment**: Pay GST collected from franchisees to the government within the prescribed due dates.
- **GST Returns**: File GST returns periodically (monthly, quarterly, or annually) depending on your turnover and the state of operation.
### Conclusion:
In summary, service tax (GST) is applicable on the income derived from providing franchise services for a pre-school business. It’s important to understand the specific requirements under GST law, ensure proper compliance, and seek professional advice if needed to handle taxation matters correctly.
### Understanding Franchise Services:
When you provide a franchise for a pre-school business, you are essentially granting another party the right to use your brand name, business model, curriculum, and other intellectual property. In return, the franchisee pays you a fee or royalty.
### Applicability of Service Tax (GST):
Under the Goods and Services Tax (GST) regime in India:
1. **Nature of Service**: Franchise services fall under the category of "business support services." The service tax or GST is applicable on such services.
2. **Taxable Event**: The taxable event for service tax or GST occurs when the services are provided or when the invoice for the services is issued, whichever is earlier.
3. **Registration**: If the annual aggregate turnover of your franchise services exceeds the threshold limit prescribed under GST law (which is typically ₹20 lakhs for most states, ₹10 lakhs for special category states), you are required to register for GST.
4. **Tax Rate**: The applicable GST rate depends on the nature of services provided. As of now, educational services and related services are generally taxed at 18% GST rate, subject to specific exemptions or notifications.
### Compliance Requirements:
To comply with GST regulations:
- **GST Registration**: Obtain GST registration if your aggregate turnover exceeds the threshold limit.
- **Tax Invoicing**: Issue proper tax invoices for the franchise fees charged to your franchisees.
- **GST Payment**: Pay GST collected from franchisees to the government within the prescribed due dates.
- **GST Returns**: File GST returns periodically (monthly, quarterly, or annually) depending on your turnover and the state of operation.
### Conclusion:
In summary, service tax (GST) is applicable on the income derived from providing franchise services for a pre-school business. It’s important to understand the specific requirements under GST law, ensure proper compliance, and seek professional advice if needed to handle taxation matters correctly.
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