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“Franchisee Fees” and “Royalty” received by the applicant under the franchise agreement from the franchisee for the right to use its trademark, brand name and other proprietary knowledge (Intellectual Property), are to be classified under Heading- 998396 and accordingly, will attract GST @ 18%.

Classification of service— In the instant case, applicant has sought advance ruling on four questions, as below: Question-1: Classification of any goods and services or both for which “Franchisee Fees” and “Royalty” received by the applicant under the franchise agreement from the franchisee for the right to use its trademark, brand name and other proprietary knowledge (Intellectual Property). Question-2: Does transfer of an operational outlet (as mentioned in the Description), would amount to “Services by way of transfer of a going concern, as a whole or an independent part thereof”? Question-3: If the answer to question no. 2 is affirmative then, whether the said services are covered under Sl. No. 2 of the Notification No.12/2017-Central Tax (Rate) dated 28th June, 2017 and exempted from payment of tax? Question-4: If the answer to Question No.2 is negative then, whether the Input Tax Credit of tax paid on the supplies received at the time of developing the outlet is admissible or not? Held that—“Franchisee Fees” and “Royalty” received by the applicant under the franchise agreement from the franchisee for the right to use its trademark, brand name and other proprietary knowledge (Intellectual Property), are to be classified under Heading- 9983-“Other professional, technical and business services” and Service Code (Tariff)- 998396 – “Trademarks and franchises” and accordingly, will attract GST @ 18%. The applicant would be eligible for Input Tax Credit subject to fulfilment of all the other conditions pertaining to the admissibility thereof laid down in the CGST Act, 2017 and the rules made thereunder.