Category - Knowhow fees

[Asked by Guest]

Under which category service tax is applicable on Technical knowhow fees payable to foreign collaborators ? They will give training to Indian staff and as well as manuals. Further, they will allow Indian co. to use their software for operations. Fees is fixed in absolute amount and will be paid in three instalments.

Under Intellectual property Services the service provided on Technical knowhow fee is liable to pay service tax. After introduction of sec.66a w.e.f. 19th April 2006 under reverse charge mechanisam Service recepient is liable to pay service tax on such service. Service tax is exempted on R & D cess paid in relation to such Intellectual Property Service.

There is no IPR. Knowhow fees is essentially for training of indian staff, manuals and methodologies for provision of special auditing services.

AI Summary

Intellectual property services: reverse-charge makes the Indian recipient liable for service tax on technical knowhow fees, including training and manuals.
Technical knowhow fees paid to foreign collaborators for training, manuals, methodologies and software use are classified as Intellectual Property Services and subject to service tax; under section 66A the reverse charge mechanism makes the Indian service recipient liable. The document notes a contention that no proprietary IPR is created but records that service tax treatment and an exemption regarding R&D cess apply.