The Directorate General of Goods and Services Tax Intelligence (DGGI) has sent show cause notices to more than a dozen food and beverages companies over trademark usage by their franchises and outlets in states other than where they have their registered offices, officials in the know said.
The notices, sent in the first week of August, seek about ₹3,000 crore from the companies for the period starting July 2017 when GST was introduced. According to the DGGI, the franchises and outlets located outside the home states of these companies are registered separately and therefore are liable to pay GST on the use of the trademark. “Tax has to be paid for use of trademark services,” a senior official told ET.
While the franchise holders and vendors were paying fees to the companies for the usage of the brands, they were not paying GST on that.
According to Schedule 1, Entry 2 of the Central GST legislation, the supply of goods or services between distinct persons (different registrations of a legal entity) is considered a taxable supply, even when made without a price.
This has led to the tax authorities classifying the use of a brand by a branch office or franchise holder in a different state as a service provided by the head office.
The DGGI is the apex intelligence and investigative agency for matters relating to violation of the Goods & Services Tax, Central Excise Duty and Service Tax. DGGI has been entrusted with the task of improving compliance of Indirect Tax laws. It has over the years established the reputation as a professional organization. Paying the right amount of tax is a social responsibility towards the nation.
As taxes are the main source of Government finance, evasion of taxes hurts everybody & hampers the larger task of nation building. We would urge all citizens to join hands with us in the task of bringing evaders of indirect taxes such as Central Excise Duty, Service Tax & GST to the books. Contact us through letter, phone, e-mail, website or in person wherever you feel that there is a tax evader in the shadows. We promise that we will take action. We promise you confidentiality and a monetary reward too in cases where your information has led to a recovery of taxes.
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