Service tax on royalty on transfer of technical know-how

[Guest]

We need to know whether we are liable for payment of service tax for transfer of technical know-how on non-exlusive basis. Please note that technical know-how is not registered under any act like Patent Act, Copyright Act in India The transfer of technical know-how is done based on a simple agreement on stamp paper. Entry under service tax for Intellectual property services requires the technical know-how to be registered under any existing Act in India. Since our technical know-how has not been registered under any act, are we liable to pay service tax on royalty received by us? We understand that recent CESTAT decision is in favour of payment of service tax on such royalty incomes although intellectual property is not registered any where. Kindly advise whether we should pay service tax. if no can you quote supporting decisions of CESTAT.

[Brijesh Verma]

Dear Srikant ji

This is actually an interesting and genuine problem these days. If possible we wish to see the "User-Agreement" entered into with the service receiver if possible. Secrecy may be maintained by whitining the names and marking X and Y. You may mail the same at [email protected].

AI Summary

Service tax on royalty: transfers of technical know how may be taxable even if unregistered, depending on classification and evidence. Liability to service tax arises on receipts characterised as royalty for transfer of technical know how even when the know how is unregistered; assessment depends on whether the consideration is classifiable as royalty or intellectual property/technical services and on the factual record (agreement terms, nature of transfer, and use rights), with recent tribunal decisions treating such unregistered transfers as taxable.