There are some diversified banks and firms that might see some more taxes beneath the GST upon their intangibles like goodwill, brand, logo fees, and despite franchise fees furnished through them, following a recent adjustment in tax rates.
In recent times the government has executed rate parity between ‘right to use’ and ‘transfer of right to use’ beneath the GST platform that shall influence the transactions in which the name of the brand gets held in a separate business and subsidiaries are permitted to practice it towards fees commented by tax experts.
After this, the tax council might start examining distinct groups and organizations concerning the worth of the brand names and trademarks.
The amendment can influence the firms such as Tata group, Mahindra Group, ICICI Bank, and HSBC Bank, etc who consist of numerous subsidiaries along with the group companies.
There is no answer to the urged questionnaire that is sent to the firms. HSBC not accepting the comments. GST shall be waived despite the companies not charging any fees as per the tax experts.
Despite if it does not get an acknowledged transaction amid concerns to the parties a company and its subsidiary or an Indian arm and its parent company overseas gets entitled beneath the GST rules.
The revealing outcome, the indirect tax department can provide the demand towards the brands and logos that are ruled via holding firm or conglomerate but are practised excluding the payment through the subsidiaries as well as the group entities. In the year 2019 towards the companies and providing preliminary letters to a number of foreign banks the tax institution has submitted the written orders of the investigation against the same.
The examinations extracted smaller as of the variation in the tax prices towards the right to utilization and transfer of right to use, that brings the GST rates of 12% and 18%, correspondingly.
Even with all the issues, the government has finally decided on the 18% GST rate. Also, the known individual of the matter mentioned that they have asked legal personal about the tax loopholes
“There are some cases already under controversy whether certain supplies should be taxed at 12% or 18% over an ambiguity between the right to use or transfer of right to use,” said by tax expert “The recent government clarification would mean that goodwill, brand and logo fees, or even franchise fees paid by companies, will be subject to intense scrutiny.”
With the accurate knowledge of the issue, the individuals said that the notices and tax demand may start incoming for the MNC and big giant companies in December itself.
“Unlike other issues, this issue could yield huge revenue for the tax department. As currently, most groups are either not valuing their intangibles or if they are, the valuations could be questioned, and in most cases, either tax is not paid or paid at a lower level,” a tax expert commented.
Tax experts said the amendment in law is indeed executed to influence some of the Indian subsidiaries of the multinationals which work upon the franchisee model and file the fee or a royalty towards their parent.
