THE FEE CHARGED FROM FRANCHISEE BY FRANCHISER IS CHARGED TO SERVICE TAX AND FRANCHISER IS LIABLE TO PAY SERVICE TAX ON THIS FEE, HOWEVER CAN ANY BODY EXPLAIN WITH RELEVENT REFERENCE THAT THE PROFIT SHARING BASIS BUSINESS WITH FRANCHISEE IS ANYWAY COVERED UNDER THE NET OF SERVICE TAX. I MEAN IF A FRANCHISER ENTERS WITH A FRANCHISEE ON A CONDITION OF SHARING GROSS PROFIT AND SHARING OTHER OPERATING EXPENSES AND OTHER CAPITAL COSTS ETC. THEN WHETHER THE AMOUNT SO CHARGED WILL BE TREATED AS A FRANCHISE FEE. KINDLY DO REPLY IN THE LIGHT OF THE FACT THAT SERVICE TAX IS LIABLE ON FRANCHISE FEE.
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FRANCHISE AGREEMENTS
Replies (1)
Hi Vishwas,
Service tax is levied on Franchise Service under clause 65(105)(zze) and the definitions of Franchiser and Franchisee is given in the legislation.
Important to note here is there is an amendment in this definitions from 16.06.2005. Before this amendment there was an inclusive definition of Frenchisee while post 16.06.2005 this definition has been widen and any two-partiate agreement between franchiser and franchisee will be covered under the Franchise Service.
So in ur case how the profit or fees has been shares has no relavance with the levy of Franchise Service and so Service Tax should be accordingly levied.
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