GST on Branding / ITC disallowed

[Bayyareddy DK]

Sir/Madam,

A Partnership Firm imports goods into India, affixes brand name and make a Sales to Pvt ltd company which has branches in different states. Firm and Pvt Ltd have common partners/directors. Brandname is registered in one of the directors. Marketing expenses, Advertisement, exhibition expenses are incurred by the Firm itself. Firm make sales only to Pvt company and its branches and not sell outside customers. Now the input tax is disallowed in firm stating the brand name is in personal name. and brand name is also used in Pvt ltd? Is the valid?

[Alkesh Jani]

Shri

As per the query and facts given, I am of the view that ITC cannot be disputed. However, more clarification is required such as

1. The owner of brand name has given his approval for use of such brand name.

2. Any consideration is given or received by the brand owner for use of brand name

3. Any contract between Firm and Pvt. Ltd that brand name should not be sold to any other entity?

Also grounds stated in SCN, issued if any, may be given so that our experts can provide their views.

Thanks

[Bayyareddy DK]

Sir,

1. The owner of brand name has given his approval for use of such brand name. - Yes approved for use within the group company

2. Any consideration is given or received by the brand owner for use of brand name. No consideration is given. After this notice, thinking put brandvalue as Rs. 1/- if it is advisable.

03. Any contract between Firm and Pvt. Ltd that brand name should not be sold to any other entity? NO contract between Firm and individual. It is family-owned company and no outside directors.

[Alkesh Jani]

Shri

As per the reply given, I am of the view that in this case, only approval (assuming oral approval) is given and no contract is available, therefore, supply between Firm and Pvt. Ltd. may be disputed and hence ITC. However, grounds of SCN, if issued, is required for arriving at proper conclusion.

You are also requested to seek help of expert near you.

Thanks

[Ashika Agarwal]

In my opinion, ITC cannot be disallowed to the Firm just because its using the Brand Name of the Director. Further, as per the information provided by you, there is Director approval for using the same.

Taxability and Valuation of Brand of Director used by Firm and Company is different issue then ITC.

As said by Alkesh ji, grounds of SCN, if issued, is required for arriving at proper conclusion

[Amit Agrawal]

I agree with Ms. Ashika Agarwal.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Padmanathan KV]

ITC of what is disputed? you have mentioned partnership is importing Goods into India. Is the ITC of IGST paid on import which is diputed?

Also, under which provision it is disputed?

[Bayyareddy DK]

Sir,

Marketing expenses, Advertisement, exhibition expenses are incurred by the Firm by affixing brand name belong to Individual partner. Also all sales are only made to Pvt ltd co and its branch's. Now the input tax is disallowed in firm stating the brand name is in personal name.

[V Rajalakshmi]

Mr Bayyareddy DK

when you have restrictions in making sales to outside the group companies then what is the necessity of spending money on advertisement and marketing? & no economic benefit is going to arise to the firm out of such expenses. Maybe that is the reason the ITC could have been disallowed.

AI Summary

ITC Disallowed for Firm Using Director's Personal Brand Name; Validity Debated Due to Group Approval, No Contract. A partnership firm importing goods into India affixes a brand name registered to one of its directors and sells exclusively to a private limited company with shared partners/directors. The firm's input tax credit (ITC) is disallowed because the brand name is in a personal name. The discussion explores whether ITC disallowance is valid, considering the brand name's approval for use within the group, lack of consideration for its use, and absence of a formal contract. Opinions vary, with some suggesting that ITC should not be disallowed solely due to the brand name's personal registration.