The Central Board of Indirect Taxes and Customs (CBIC) has recently announced flat 18% tax for both ‘right to use’ and ‘transfer of right to use’ under the GST framework. However, earlier is was 12% and 18%, respectively
As a result, some bank, conglomerate and companies may face additional taxes as GST on their intangibles, such as goodwill, brand, logo fees and even franchise fees paid by them. GST will be levied even if businesses do not charge any fees, according to tax experts. Even if there is no consideration, a transaction between related parties, firm and its subsidiary or an Indian arm and its parent company overseas is liable under the GST rules.
Accordingly, the tax authorities may begin investigating various groups and corporations about how much their brand names and trademarks are worth and whether or not they impose GST on the amount.
Further, the indirect tax department may issue demands for brands and logos that are held by a holding company or conglomerate but are utilised without payment by subsidiaries and group entities. Tax experts say the change in law is also set to impact some of the Indian subsidiaries of multinationals that work on a franchisee model and pay a fee or royalty to their parent.
As per people with direct knowledge of the matter, it is expected that fresh notices and tax demands could start coming in as early as December for the large conglomerates.