GST applicability on Brand

[Bayyareddy DK]

Sir,

My client is owning registered brand in his individual name and he is not registered under GST Act. He has been using this brand for his partnership business (importer of goods) as partner and as well his retail business in a Pvt ltd company as he is also a director. All imported goods are sold to his Pvt ltd company only. Individual is not charging any fee for branding. Firm and Pvt ltd are registered under GST Act. Is the GST applicable on this transaction for lending brand to his firm and pvt ltd company and vice versa? please advice

[KASTURI SETHI]

Sh.Bayyareddy DK Ji,

Your client's transaction is covered under Schedule-1 of CGST Act. Relevant clause is extracted below :

SCHEDULE-1 (See Section-7)

ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION

2. Supply of goods or services or both between related persons or between distinct persons as specified in Section 25, when made in the course or furtherance of business :

[KASTURI SETHI]

Branding the goods is a service.It establishes a link between manufacturer and product.To allow the use of brand name for goods to another person is supply of service.

[Shilpi Jain]

Agree with Kasturi sir. Please see what could you value this as? Not sure if there would be a market value readily available.

See if you can choose the 2nd proviso to rule 28 by which, in case the full credit is available to the recipient, any value can be charged.

[Ganeshan Kalyani]

I agree with the views of Sri Kasturi SIr. Transaction between related person is subject to GST.

AI Summary

Supply between related persons treated as taxable service when brand use is permitted without consideration. Permitting use of a registered brand to related business entities without charging consideration is a supply under Schedule 1 and constitutes a taxable service. Branding that links product and proprietor supplied to related or distinct persons in course or furtherance of business is treated as supply even if made without consideration. Taxable value should reflect market value unless an alternative valuation applies, for example the proviso allowing an agreed value where the recipient avails full input tax credit.