Applicability of VAT on Payments of Royalty To Foreign Holding Company

[suresh arigela]

Dear All,

Greetings of the day.

we are a company Situated in State of Tamailnadu,

We paid Royalty to our Foreign parent company for their technical Know how support and also paid service tax for Availing of Services.

now The Tamilnadu Vat dept.sent one Notice to pay vat on The Royalty amount paid to our parent company.

is Vat applicable on payment of Royalty? in the State of Tamilnadu?

please Provide Your Views .

thanks in advance .

AI Summary

Company Challenges VAT on Royalty Payments for Technical Know-How; Seeks Clarification on Tax Applicability and Input Credit A company in Tamil Nadu is questioning the applicability of VAT on royalty payments made to its foreign parent company for technical know-how. The Tamil Nadu VAT department has issued a notice demanding VAT on these payments. A reference is made to a court case where the transfer of trademark rights was deemed taxable under sales tax laws. It is suggested that purchase tax might apply, but the company could claim input tax credit since the technology is used in manufacturing. The company seeks clarification on whether VAT is applicable despite having paid service tax under the reverse charge mechanism.