Franchisee Fees” and “Royalty” received from franchisee are to classified under SAC 998396 - “Trademarks and franchises” and accordingly, will attract GST @ 18%.


Quick Summary
The Gujarat Authority for Advance Ruling has determined that franchisee fees and royalties received by a franchisor are to be classified under SAC 998396, which covers "Trademarks and franchises". Consequently, these payments will attract a Goods and Services Tax (GST) rate of 18%. This ruling clarifies the tax treatment for businesses operating franchise models.

Court :
Gujrat AAR

Brief :
The applicant is a Tea House Chain under the brand name and style of TEA POST, whereby they sell non-alcoholic beverages, snacks and merchandise items either directly or through outlets owned by them or by third party under the franchise agreement.

Citation :
ADVANCE RULING NO. GUJ/GAAR/R/35/2020

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