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

Royalty taxability under Intellectual Property services attracts service tax after statutory change; permanent transfers of IPR remain exempt.
Royalty payments for use of IPR or permitting use of know how are taxable under the Intellectual Property services category introduced by statute; however, permanent transfers of IPR rights are not treated as services and are excluded from service tax. An R&D cess applies in connection with the notification introducing IP services and such cess may be deductible from the total service tax liability.