If the aggregate value of the taxable services provided by a service provider in a financial year is up to Rs 4 Lakh, there is no liability on the service provider to pay the service tax as it is exempted vide Notification No 6/2005-service Tax dated 1 March 2005. However, the benefit of exemption is available subject to the following conditions:
a) Service is not provided by the service provider under a brand name or trade name
b) Value of service shall be aggregate value not exceeding Rs 4 Lakh from one or more premises and from one or more taxable service
c) In the last preceding financial year, aggregate value of all taxable services provided from one or more premises does not exceed Rs 4 Lakh
d) It is obvious that service provider should not avail the credit of service tax paid on the input service under the CENVAT Credit Rules, 2004
e) In case aggregate value of taxable service exceeds Rs 4 lakh, the first consecutive payments upto Rs 4 Lakh will be exempted. Subsequent payments will be subject to tax. Further, in the subsequent year, the benefit of exemption will not be available as the aggregate value of the preceding year will exceed Rs 4 Lakh
f) The exemption is not available for the services in respect of which the service receiver is liable to pay the service tax on the services availed by him, as in the case of Goods Transport Agency Service. Irrespective of the aggregate value of taxable service provided by a corporate service provider, if any freight has been paid, service tax has to be paid by the company.
Wednesday, December 27, 2006
Monday, December 25, 2006
Intellectual Property Service
India is a developing country with a growth rate of about 7 to 9%. Service Industry is developing rapidly than manufacturing sector and growth rate in agricultural sector is the lowest.
To increase the tax base and tape new areas for revenue, Government of India has started imposing Service Tax on designated services since 1994. Initially, a few services were taxed, but over the years, the list of taxable service is expanding and at present 105 services are under tax net.
This blog seeks to demystify the service tax on Intellectual Property Service.
To increase the tax base and tape new areas for revenue, Government of India has started imposing Service Tax on designated services since 1994. Initially, a few services were taxed, but over the years, the list of taxable service is expanding and at present 105 services are under tax net.
This blog seeks to demystify the service tax on Intellectual Property Service.
1. Meaning and Scope
Intellectual property (‘IP’) refers to legal entitlements which are attached to certain types of information, ideas, or other intangibles in their expressed form. The holder of this legal entitlement is generally entitled to exercise various exclusive legal rights in relation to the subject matter of the IP. IP right owner(s) may sell, transfer, assign, licence or permit the right to use of IP to another person for a consideration. Vide Finance Act 2004, IP service has been brought within the ambit of service tax w.e.f. 10 September 2004 to tax the payments received/made toward transfer/acquisition of such rights.
Section 65(105) (zzr) of the Finance Act, 1994 (‘the Finance Act’) seeks to levy service tax on service provided to any person, by the holder of intellectual property right, in relation to intellectual property service.
As per Section 65 (55a) of the Finance Act, “intellectual property right” (‘IPR’) means any right to intangible property, namely, trade marks, designs, patents or any other similar intangible property, under any law for the time being in force, but does not include copyright.
As per Section 65 (55b) of the Finance Act, “intellectual property service” means,
(a) transferring temporarily; or
(b) permitting the use or enjoyment of any intellectual property right
Section 65(105) (zzr) of the Finance Act, 1994 (‘the Finance Act’) seeks to levy service tax on service provided to any person, by the holder of intellectual property right, in relation to intellectual property service.
As per Section 65 (55a) of the Finance Act, “intellectual property right” (‘IPR’) means any right to intangible property, namely, trade marks, designs, patents or any other similar intangible property, under any law for the time being in force, but does not include copyright.
As per Section 65 (55b) of the Finance Act, “intellectual property service” means,
(a) transferring temporarily; or
(b) permitting the use or enjoyment of any intellectual property right
2. Key ingredients
• Service is provided by the holder of IPR
• IPR is recognized under the Indian law
• IPR does not pertains to copyright
• IPR law should be in force at relevant time
• IPR is transferred temporarily or permitted to use without transfer
• Service is provided to a client
• IPR is recognized under the Indian law
• IPR does not pertains to copyright
• IPR law should be in force at relevant time
• IPR is transferred temporarily or permitted to use without transfer
• Service is provided to a client
2.1 IPR holder:
IP reflects the idea that the subject matter is product of the mind or the intellect of a person. Once this fact is recognized by the law, the law protects the right to use and such person becomes the IPR holder and entitled to exclusive rights to use the idea. Generally, the inventor of the idea is the IPR holder. However, as IPRs are transferable, a person who acquires such rights legally may also be an IPR holder, even though he may not be the inventor of such idea. If a person renders intellectual property service for an IPR, to which he is not legal holder, then such service can not be taxed.
2.2 Recognition under Indian law:
IPR should be conferred to a person under Indian law. Service rendered by a person whose IPR is not recognized under Indian law cannot be brought within the ambit of service tax. IP laws in India are listed below:
• The Trade Marks Act, 1999
• The Patent Act, 1970
• The Copyright Act, 1957
• The Design Act, 2000
• The Geographical Indication of Goods (Registration and Protection) Act, 1999
• The Protection of Plant Varieties and Farmers Right Act, 2001
• The Semiconductor Integrated Circuits Layout Design Act, 2000
• The Biological Diversity Act, 2002
• The Trade Marks Act, 1999
• The Patent Act, 1970
• The Copyright Act, 1957
• The Design Act, 2000
• The Geographical Indication of Goods (Registration and Protection) Act, 1999
• The Protection of Plant Varieties and Farmers Right Act, 2001
• The Semiconductor Integrated Circuits Layout Design Act, 2000
• The Biological Diversity Act, 2002
2.2.1 The Trade Marks Act, 1999
The Trade Marks Act, 1999 (‘the Trade Mark Act’) provides for registration and protection of trade marks for goods and services and prevent use of fraudulent marks.
As per Section 2(zb) of the Trade Marks Act, "trade mark" means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include shape of goods, their packaging and combination of colours.
Under section 18 of the Trade Mark Act, any person claiming to be the proprietor of a trade mark, used or proposed to be used by him, may apply for the registration and on registration, under section 28 thereof, registered proprietor of the trade mark acquires exclusive right to use same in relation to the goods in respect of which the trade mark is registered and to obtain relief in respect of the infringement of the trade mark. As per section 38 of the Trade Marks Act, registered trade marks can be assigned and transmitted to another person and on the registration of such assignment and transmission, such person becomes the proprietor of trade marks or registered proprietor.
As per section 27 of the Trade Marks Act, proprietor of unregistered trade mark does not get any exclusive right of use and therefore he can not be considered as IPR holder. Therefore, only the registered proprietor of the registered trade mark can be considered as IPR holder.
Further, as per section 48 of the Trade Marks Act, a person other than registered proprietor of a trade mark may be registered as the registered user on the execution of a written contract between the registered proprietor and proposed registered user and such registered user will be entitled to use and enjoy the benefit of the trade mark.
As per Section 2(zb) of the Trade Marks Act, "trade mark" means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include shape of goods, their packaging and combination of colours.
Under section 18 of the Trade Mark Act, any person claiming to be the proprietor of a trade mark, used or proposed to be used by him, may apply for the registration and on registration, under section 28 thereof, registered proprietor of the trade mark acquires exclusive right to use same in relation to the goods in respect of which the trade mark is registered and to obtain relief in respect of the infringement of the trade mark. As per section 38 of the Trade Marks Act, registered trade marks can be assigned and transmitted to another person and on the registration of such assignment and transmission, such person becomes the proprietor of trade marks or registered proprietor.
As per section 27 of the Trade Marks Act, proprietor of unregistered trade mark does not get any exclusive right of use and therefore he can not be considered as IPR holder. Therefore, only the registered proprietor of the registered trade mark can be considered as IPR holder.
Further, as per section 48 of the Trade Marks Act, a person other than registered proprietor of a trade mark may be registered as the registered user on the execution of a written contract between the registered proprietor and proposed registered user and such registered user will be entitled to use and enjoy the benefit of the trade mark.
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