Dear Sir,
We are a mid size biscuit manufacturing company. We have given our brand logo to another company for their use on the packets manufactured by them. In return, they pay us royalty as per agreement with them for our transferring rights to them to use our brand. our question is whether VAT is payable on the royalty that we receive from our brand user.
Looking forward to expert advice urgently.
Regards,
Babulal Sharmma
Bhagwati Foods Pvt. Ltd.
VAT on Royalties for Logo Use Depends on Right to Transfer; Refer to Malabar Gold Pvt Ltd Case A biscuit manufacturing company inquired about the applicability of VAT on royalties received for allowing another company to use its brand logo. The response referenced a Kerala High Court judgment in the case of Malabar Gold Pvt Ltd, which determined that VAT is payable on such royalties as they constitute a 'transfer of rights to use goods.' However, the court also clarified that if the transaction does not allow the franchisee to transfer or sub-let the trademark, it does not qualify as a 'transfer of right to use,' and thus, VAT is not applicable. (AI Summary)
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