The indirect tax department wants the software companies to value the global brand names and logos used in India, charge a fee on that and pay 18% goods and services tax (GST) on top of it, according to people with direct knowledge of the matter. Industry trackers said currently there is no valuation mechanism for global technology companies in India.
In most cases, a brand licensing agreement is undertaken for which the Indian arms pay a fee to the parent that software majors club under “management fees” or “consultancy fees”. Software companies including Google, Facebook, Microsoft, SAP and Oracle, among others, have been questioned by the tax department and asked to explain whether they assign value on such transactions. None of the companies responded to an email query ET sent.