Whether Royalty payment liable for service tax

[krishnan n r]

Indian Research Society transfered new technology to a manufature telecom product for a technical know how fee and the manufaturer has to pay a percentage of royalty on the sale of product for a given period of time.  Question arises whether the service tax is payable on the royalty payment received by the Transferor and if it is so, when the incidence of tax arises in such cases

 

AI Summary

Royalties for IPR, including know-how, are taxable under service tax; permanent IPR transfers exempt. R&D Cess deductible. A discussion on a forum addresses whether royalty payments for technology and know-how are subject to service tax. Initially, it is argued that such payments are not for services rendered and hence not taxable. However, it is noted that since the introduction of the Intellectual Property Rights (IPR) category on September 10, 2004, royalties for IPR activities, including know-how, are taxable. It is clarified that permanent transfers of IPR are exempt from service tax, and a Research and Development Cess of 5% is deductible from the total service tax payable.