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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 TaxDescription of Service
9973312%Temporary or permanent transfer or permitting the use or enjoyment of intellectual property (IP) right in respect of goods other than information technology software.
99733118%Temporary or permanent transfer or permitting the use or enjoyment of intellectual property (IP) right in respect of information technology software.
99859918%Other support services– management services for rights to industrial property (i.e. trademarks, franchises, etc.).

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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