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Joined January 2010
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Originally posted by : Shrikant Karwa |
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We need to know whether we are liable for payment of service tax for transfer of technical know-how on non-exlusive basis. Please note that technical know-how is not registered under any act like Patent Act, Copyright Act in India The transfer of technical know-how is done based on a simple agreement on stamp paper. Entry under service tax for Intellectual property services requires the technical know-how to be registered under any existing Act in India.
Since our technical know-how has not been registered under any act, are we liable to pay service tax on royalty received by us? We understand that recent CESTAT decision is in favour of payment of service tax on such royalty incomes although intellectual property is not registered any where. Kindly advise whether we should pay service tax. if no can you quote supporting decisions of CESTAT.
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(F) Clarifications issued by the Board:
Intellectual property services (other than copyrights) – (1) Intellectual property
emerges from application of intellect, which may be in the form of an invention, design,
product, process, technology, book, goodwill etc. In India, legislations are made in
respect of certain Intellectual Property Rights (i.e. IPRs) such as patents, copyrights,
trademarks and designs. The definition of taxable service includes only such IPRs
(except copyright) that are prescribed under law for the time being in force. As the
phrase ‘law for the time being in force’ implies such laws as are applicable in India, IPRs
covered under Indian law in force at present alone are chargeable to service tax and
IPRs like integrated circuits or undisclosed information (not covered by the Indian law)
would not be covered under taxable services.
(2) A permanent transfer of intellectual property right does not amount to rendering
of service. On such transfer, the person selling these rights no longer remains a ‘holder
of intellectual property right’ so as to come under the purview of taxable service. Thus,
there would not be any service tax on permanent transfer of IPRs.
(3) In case a transfer or use of an IPR attracts cess under Section 3 of the Research
and Development Cess Act, 1986, the cess amount so paid would be deductible from
the total service tax payable (refer Notification No.17/2004-S.T., dated 10-9-2004).
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