Payment of Service Tax on Royalty paid to foreign Service provider.

[vinay wakde]

We have paid Royalty in terms of Agreement with the Foreign service provider during 2007-2008. This is in respect of set-up of new ZR module to enhance the production capacity. As per the agreement, the payment of Royalty USD 1 per MT to be paid and accordingly we have paid 9 Lacs USD to the Foreign Service provider during 2007-08. Since, the payment made by us does not related to any service rendered by the Service provider, we have not paid any Service Tax under Intellectual Property Right. Kindly let us know whether such  payment shall be covered in Service catagory ' Intellectual property Right' .

Regards,

VINAY

[YAGAY andSUN]

Yes Sir,

 

It is covered under IPRs Service.

AI Summary

Intellectual Property Rights: royalty payments to foreign providers constitute IPR service and attract service tax liability. Payments characterised as royalties to a foreign service provider for the set up of production equipment were questioned as outside service tax; the advisory response affirms such royalty payments are covered by the IPR service category and thus fall within the taxable service classification.