R & D Cess on Import of Technical Know-How
This query is : Resolved
08 February 2011
Dear sir,
Our company is importing technical know-how from Germany.
1. Do the company need to pay R&D Cess @ 5% on import of technical know-how? Are there any exemptions from this levy?
2. As per my understanding Cenvat credit of Service tax paid (@ 5.30%) can be taken. But is it anyway possible to take Cenvat credit / Refund of the R & D Cess paid? Please provide procedure to claim the same
Please provide copy of the R&D Cess Rule, if possible.
Our company is importing technical know-how from Germany.
1. Do the company need to pay R&D Cess @ 5% on import of technical know-how? Are there any exemptions from this levy?
2. As per my understanding Cenvat credit of Service tax paid (@ 5.30%) can be taken. But is it anyway possible to take Cenvat credit / Refund of the R & D Cess paid? Please provide procedure to claim the same
Please provide copy of the R&D Cess Rule, if possible.
09 February 2011
DEAR PRIYANK, please search for R&D Cess. in google.com, its called Abatement R & D Cess of, can be taken in calculation of Service tax on import of services.
DEAR PRIYANK, please search for R&D Cess. in google.com, its called Abatement R & D Cess of, can be taken in calculation of Service tax on import of services.
09 February 2011
Dear Vipin sir,
Thanks for your reply. I could not find any relevant material or case law for R&D Cess on Google.
My query is that, is the company paying R & D Cess can claim CENVAT credit for R & D Cess paid against its Excise / Service Tax Liability?
Further, the transaction is one off transaction. The compnay is importing technical know-how for manufacturing of 3 kinds of products. There are no other arrangements between the companies. Does the transaction still falls within the term "Foreign Collaboration"?
Thanks for your reply. I could not find any relevant material or case law for R&D Cess on Google.
My query is that, is the company paying R & D Cess can claim CENVAT credit for R & D Cess paid against its Excise / Service Tax Liability?
Further, the transaction is one off transaction. The compnay is importing technical know-how for manufacturing of 3 kinds of products. There are no other arrangements between the companies. Does the transaction still falls within the term "Foreign Collaboration"?
19 July 2025
1. Applicability of R&D Cess @ 5% on Import of Technical Know-How
R&D Cess was introduced under the Cess Act, 1986 to fund Research & Development activities.
It applies @5% on import of technology or technical know-how.
Whether the import of technical know-how attracts R&D Cess depends on:
If the import is classified as “foreign technology collaboration” or technical know-how transfer under Customs or Central Excise rules.
Generally, R&D Cess applies on royalty or lump sum fees for technical know-how imported.
Exemptions: Some categories may be exempt based on notifications issued by the government or if covered under double taxation avoidance agreements.
2. CENVAT Credit / Refund of R&D Cess paid
CENVAT Credit is allowed only on Service Tax and Excise Duty, but R&D Cess is not service tax or excise duty, it is a separate cess.
As per the R&D Cess Rules, CENVAT credit of R&D Cess is generally not allowed.
R&D Cess paid is not eligible for refund under normal CENVAT credit rules.
However, since Service Tax @5.30% (including education cess) on the import of technical know-how can be credited as CENVAT credit if the technical know-how service is used in the course of business.
3. Is this transaction “Foreign Collaboration”?
Foreign collaboration generally means arrangement where the foreign party provides technology, technical know-how, or technical assistance.
Even if the transaction is one-off, import of technical know-how falls under foreign collaboration, if it involves transfer of technology or rights.
This classification is important because R&D Cess and other duties are linked to foreign collaboration agreements.
4. Procedure / Rules to refer
The R&D Cess Act, 1986 and R&D Cess Rules, 1988 govern the levy and collection of R&D Cess.
For details on R&D Cess and its applicability, you can check:
Central Excise Rules under Service Tax laws for import of services.
Customs notifications for imports of technical know-how.
Unfortunately, R&D Cess Rules are not commonly published online officially, but summaries are available in tax handbooks or can be obtained from the Central Excise department.
R&D Cess was introduced under the Cess Act, 1986 to fund Research & Development activities.
It applies @5% on import of technology or technical know-how.
Whether the import of technical know-how attracts R&D Cess depends on:
If the import is classified as “foreign technology collaboration” or technical know-how transfer under Customs or Central Excise rules.
Generally, R&D Cess applies on royalty or lump sum fees for technical know-how imported.
Exemptions: Some categories may be exempt based on notifications issued by the government or if covered under double taxation avoidance agreements.
2. CENVAT Credit / Refund of R&D Cess paid
CENVAT Credit is allowed only on Service Tax and Excise Duty, but R&D Cess is not service tax or excise duty, it is a separate cess.
As per the R&D Cess Rules, CENVAT credit of R&D Cess is generally not allowed.
R&D Cess paid is not eligible for refund under normal CENVAT credit rules.
However, since Service Tax @5.30% (including education cess) on the import of technical know-how can be credited as CENVAT credit if the technical know-how service is used in the course of business.
3. Is this transaction “Foreign Collaboration”?
Foreign collaboration generally means arrangement where the foreign party provides technology, technical know-how, or technical assistance.
Even if the transaction is one-off, import of technical know-how falls under foreign collaboration, if it involves transfer of technology or rights.
This classification is important because R&D Cess and other duties are linked to foreign collaboration agreements.
4. Procedure / Rules to refer
The R&D Cess Act, 1986 and R&D Cess Rules, 1988 govern the levy and collection of R&D Cess.
For details on R&D Cess and its applicability, you can check:
Central Excise Rules under Service Tax laws for import of services.
Customs notifications for imports of technical know-how.
Unfortunately, R&D Cess Rules are not commonly published online officially, but summaries are available in tax handbooks or can be obtained from the Central Excise department.
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