Franchise fee

[rishi mohan]

We have taken a franchise from a foreign company located outside India for using their brand image. For this we enter into an agreement and paid franchisee fee. We also paid royalty at certain percentage on the fee paid.

As a franchisee are we liable to pay service tax on reverse charge basis on the above?

[Madhukar N Hiregange]

Yes liable under reverse charge

[Mahir S]

Yes, service tax liability arises under reverse charge mechanism.

AI Summary

Reverse charge liability: franchisees must remit service tax on fees and royalties paid to nonresident franchisors. Franchisee liability for service tax arises where an Indian entity pays fees and royalties to a non resident for use of a foreign brand image; under the reverse charge mechanism the Indian recipient (franchisee) must account for and remit service tax on such imported brand licensing services.