Service Tax on Intellectual Property Services

  • June 14, 2022
  • Dushyant Sharma
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Service Tax

Service tax is an indirect tax, which is collected by government from the service providers for the services they provide. Service tax is a burden to be borne by the person who receives services, but it is the responsibility of the service provider to collect and pay to the government.

Service tax is required if you are into business of providing services and once the turnover exceeds Rs. 9 lakhs annually. Service tax levied is deposited to the government account on monthly or quarterly basis.

Also Read: What is Intellectual Property Rights(IPR) and types of IPR in India?

Intellectual Property Services

Intellectual property refers to the creative aspects of the mind such as inventions, literary and art works, designs, symbols, images, etc., that are protected by law. There are different methods in which one can protect the intellectual property. Patents, copyrights, trademarks, etc. are examples of intellectual property protection methods.

In legal terms, intellectual property right that is IPR means any right to intangible property, namely, trademarks, designs, patents or any other similar intangible property, under any law for the time being in force, but does not include copyright.

Therefore, intellectual property service means transferring, temporarily, or permitting the use of enjoyment of, any intellectual property right.

Service Tax on Intellectual Property Services

Any service provided to any person by the holder or intellectual property right in relation to intellectual property service is taxable under the law. There are certain conditions to be met for any service to be taxed.

  • Service should be provided to any person
  • Service should be provided by the holder of IPR
  • Service should be any service in relation to IPR
  • IPR should be transferred temporarily or permitted to use without transfer
  • IPR should not pertain to copyright
  • IPR should be recognized under Indian laws

A permanent transfer of intellectual property right is not considered as rendering of service. This is due to the fact that the person permanently transferring or selling the intellectual property right is no longer the holder of the IPR and this is one of the conditions to met for the service to be taxable.

Therefore, service tax on IPR services is applicable only when the IPR services are transferred temporarily to another entity for the use of or enjoyment for a certain amount of time. The holder of the IPR based on its own valuation and criteria will determine the value of service tax to be levied on such a service.

There is an exemption in the technology domain; the amount of tax paid for the import of technology in relation to any intellectual property right is not included in the value of taxable service. The holder of an intellectual property right shall be liable to pay service tax and shall be treated as an assesse for service tax purposes.

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Dushyant Sharma
Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.

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