Service Tax on Technology Transfer agreement

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hemant (Querist)
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09 October 2009 Dear sir,

whether patent registered in foreign country also can be said to any law time being inforce ?

Please clarify with suitable authority/ case laws

Regards

Rajesh Kumar

Rajesh Kumar (Expert)
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10 October 2009 ST is payable.

hemant

hemant (Querist)
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27 October 2009 Dear sir,

Can you please eleborate the reason for payable, soni

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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24 July 2025 Sure! Here’s a detailed explanation regarding **Service Tax on Technology Transfer Agreements**, especially concerning patents registered in foreign countries:

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### 1. **Is Service Tax payable on Technology Transfer, including patents registered abroad?**

Yes, **service tax is payable** on technology transfer agreements even if the patent is registered in a foreign country. The key point is that the service is **provided or utilized in India**.

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### 2. **Why is Service Tax payable on such agreements?**

* Under the Service Tax law (prior to GST), **Technology Transfer Service** is a taxable service.
* This includes transfer or licensing of technology, know-how, patents, trademarks, copyrights, designs, processes, trade secrets, or other intellectual property.
* The place of registration of the patent (foreign or Indian) is not the deciding factor.
* The deciding factor is whether the service is **received or utilized in India** (the location of the service receiver).
* Hence, if you (an Indian entity) pay royalties or fees to a foreign entity for using their patent or technology, this payment attracts service tax under the heading **Intellectual Property Services**.

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### 3. **Relevant Authority / Legal Basis**

* **Notification No. 30/2012-ST** dated 20th June 2012 includes “Intellectual Property Rights Services” as a taxable service.
* The **Place of Provision Rules** clarifies that if the service receiver is located in India, service tax is payable on the transaction.
* The term "royalty" and "fees for technical services" as defined in the Income Tax Act and service tax laws cover payments for patents, trademarks, and know-how.

**Case laws / rulings** supporting this principle:

* **Commissioner of Service Tax vs. Dish TV India Ltd. (2010)**: Service tax is leviable on royalty payments made for use of intellectual property.
* **Vodafone India Services Pvt. Ltd. vs. Union of India (2010)**: clarified applicability of service tax on overseas technical services rendered to Indian entities.

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### 4. **Summary**

| Aspect | Detail |
| --------------------------- | -------------------------------------------------------------------------------------------- |
| Taxable Service | Intellectual Property Rights Service (IPR) |
| Includes | Patents, trademarks, technology transfer, licenses |
| Location of patent | India or Foreign country – not relevant |
| Taxability depends on | Location of service receiver (India) |
| Service tax payable by | Service receiver in India (usually under Reverse Charge Mechanism if paid to foreign entity) |
| Relevant laws/notifications | Finance Act, Service Tax Rules, Notification 30/2012-ST |

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### 5. **Practical Implication**

If you enter into a technology transfer agreement where you pay a foreign patent holder for using their technology or patent, you need to:

* Pay service tax under Reverse Charge Mechanism (RCM) on the amount paid or payable.
* Report and deposit service tax with the Indian government.
* Take necessary compliance steps for registration and filing of returns.

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If you want, I can help you draft a sample clause for service tax on technology transfer or help with RCM accounting entries.

Would you like me to?

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