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

AI Summary

Dispute Over Service Tax on $9M Royalty for Foreign IPR Services in 2007-2008: Is It Applicable? A query was raised regarding the payment of service tax on royalty paid to a foreign service provider during 2007-2008 for the setup of a new module to enhance production capacity. The royalty agreement stipulated a payment of USD 1 per metric ton, totaling 9 million USD. The inquirer believed this payment was not related to any service rendered and therefore did not pay service tax under Intellectual Property Rights (IPR). A respondent confirmed that such payments are indeed covered under IPR services, implying that service tax should be applicable.