VAT on royalty

[SANJAY KUMAR]

we are raised bill for royalty receive from party. we are Charge service tax @10.3% & VAT 4% in bill. please clear my issue we should charge vat or not please provide fully comments on this issue

[Rama Krishana]

In my view if the royalty is related right to use of the good, you have to pay VAT. If no good is involved and royalty is related to services which are not goods, no VAT is payable. The determination that the transaction in question is good or not is a question of fact and needs to be addressed carefully.

AI Summary

VAT applicability on royalty depends on whether the royalty grants a right to use goods or covers non goods services. Whether VAT applies to royalty payments depends on whether the royalty grants a right to use goods, in which case VAT applies, or relates solely to non goods services, in which case VAT does not apply; classification is a question of fact and suppliers must assess the substance of the licensed subject before charging VAT.