EFFECTIVE RATE OF SERVICE TAX ON INTELECTUAL PROPERTY SERVICE

[VINOD KUMAR]

PLEASE INTIMATE THE EFFECTIVE RATE OF SERVICE TAX ON INTELLECTUAL PROPERTY SERVICE (IMPORT OF TECHNOLOGY) AFTER DEDUCTING R&D CESS i. e. WHETHER IT WILL BE 12.36%-5% R&D CESS = 7.36% OR 12%-5%=7%+. 21%(CESS)=7.21%.AN EARLY REPLY IS REQUESTED. THANK YOU SIR.

[YAGAY andSUN]

Dear Vinod,

NOTIFICATION No. 18/2002 - Service Tax, Dated December 16, 2002, reads as:

In exercise of the powers conferred by Sub-section (1) of Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services provided by a consulting engineer to any person on transfer of technology from so much of the service tax leviable thereon under Section 66 of the said Act, as is equivalent to the amount of cess paid on the said transfer of technology under the provisions of Section 3 of the Research and Development Cess Act, 1986 (32 of 1986).

Now this is amended by Notification No. 46/2011 dated 19 September 2011 to read as:

In exercise of the powers conferred by Sub-section (1) of Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services provided by a consulting engineer to any person on transfer of technology from so much of the service tax leviable thereon under Section 66 of the said Act, as is equivalent to the “amount of cess payable on the said transfer of technology under the provisions of section 3 of the Research and Development Cess Act, 1986 (32 of 1986), subject to the following conditions, namely:-

(A) the said amount of Research and Development Cess is paid within six months from the date of invoice or in case of associated enterprises the date of credit in the books of account:

Provided that the exemption shall be available only if the Research and Development Cess is paid at the time or before the payment for the service;

(B) records of Research and Development Cess are maintained for establishing the linkage between the invoice or the credit entry, as the case may be, and the Research and Development Cess payment challan.

So, to claim the exemption, the assessee had to:

• pay the cess within six months from the date of invoice;
• the cess is paid with or before the payment for the service; records to show linkage has to be maintained.

Further this, Notification was amended by 14/2012-ST

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

Government of India
Ministry of Finance
(Department of Revenue)

Notification No.14/2012 - Service Tax

New Delhi, the 17^th March 2012

G.S.R. (E). - In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service involving import of technology, from so much of the service tax leviable thereon under section 66B of the said Act, as is equivalent to the amount of cess payable on the said import of technology under the provisions of section 3 of the Research and Development Cess Act, 1986 (32 of 1986), subject to the following conditions, namely:-

(a) that the said amount of Research and Development Cess is paid within six months from the date of invoice or in case of associated enterprises, the date of credit in the books of account:

Provided that the exemption shall be available only if the Research and Development Cess is paid at the time or before the payment for the service;

(b) that the records of Research and Development Cess are maintained for establishing the linkage between the invoice or the credit entry, as the case may be, and the Research and Development Cess payment challan.

2. This notification shall come into force from the date on which section 66B of the Finance Act, 1994 comes into effect.

 

[F. No. 334/1/2012-TRU]

(Samar Nanda)

Under Secretary to the Government of India

After going through the above, in our opinion, it will be Service Tax would be calculated @7.21%.

Team YAGAY and SUN

(Management and Indirect Tax Consultants)

 

[VINOD KUMAR]

THANK YOU SIR.

AI Summary

Service Tax on Imported Tech Services Set at 7.21% After R&D Cess Deduction Per Notifications 18/2002, 46/2011, 14/2012. A query was raised regarding the effective service tax rate on intellectual property services, specifically the import of technology, after deducting the R&D cess. The discussion referenced several notifications, including Notification No. 18/2002, 46/2011, and 14/2012, which outline exemptions and conditions for service tax on technology transfers. The response clarified that the service tax rate should be calculated at 7.21% after considering these exemptions. The conditions include paying the R&D cess within six months of the invoice date and maintaining records to establish the linkage with the payment.