Service tax on royalty

[Prakash Gupta]

Whether service tax applicable under reverse charge mechanism on Royalty paid by resident company to non resident.

Thanks & Regards,

Pankaj Singh

[Rajagopalan Ranganathan]

Sir,

The answer is 'yes'.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Shri Rajagopalan

[Ganeshan Kalyani]

I too agree with both the experts. Thanks.

[Hardik Shah]

Agree with the views of experts. However, I would request you to check the applicability of Research and Development Cess.

[KASTURI SETHI]

Regarding availing cenvat credit on Service Tax paid on royalty charges, I think R & D Cess has no link in any way.

[Ganeshan Kalyani]

Yes both are different in there way.

AI Summary

Reverse charge on royalty requires the resident payer to discharge service tax; cenvat credit and R&D cess are distinct.
Payment of royalty by a resident to a non-resident triggers a reverse charge service tax obligation on the resident payer, requiring the domestic recipient to discharge service tax on such royalty; contributors agree this falls within taxable services. Separately, cenvat credit on service tax paid for royalty is a distinct compliance issue and Research and Development cess is not directly connected to cenvat credit eligibility.