Sunday, July 31, 2022
RCM on royalty paid to foreign company
Under GST regime, temporary transfer or permitting the use or enjoyment of intellectual property right constitutes supply of service as per Schedule II read with Section 7 of CGST Act 2017.
Relevant Section: Section 7 of CGST Act 2017
Relevant Section: Section 13(3) of CGST Act 2017
Relevant Schedule: Schedule II of CGST Act 2017
Following are the rates applicable for Intellectual Property Right based on HSN:
| HSN | Rate of Tax | Description of Service |
|---|---|---|
| 99733 | 12%/[18% from w.e.f. 01/10/2021]* | Temporary or permanent transfer or permitting the use or enjoyment of intellectual property (IP) right in respect of goods other than information technology software. |
| 997331 | 18% | Temporary or permanent transfer or permitting the use or enjoyment of intellectual property (IP) right in respect of information technology software. |
| 998599 | 18% | Other support services– management services for rights to industrial property (i.e. trademarks, franchises, etc.). |
- Notification no. 11/2017 S. No. 17 has been amended vide Notification no. 06/2021 dated 30/09/2021 and now the combined rate "Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right" is 18%.
Time of Supply
It is important to note, the Time of Supply applicable [Proviso to section 13(3) of CGST Act] to such scenarios.
Earlier of:
- Date of entry in the books of the recipient
- Date of payment
The TOS provision of 60 days for payment to vendor/61st day if unpaid would not be applicable here.
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