CBIC increased GST rate on permanent transfer of Intellectual Property right in respect of goods

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The CBIC vide Notification No. 13/2021-Central Tax (Rate) dated October 27, 2021 has further amended Notification No. 01/2017- Central Tax (Rate) dated June 28, 2017 to align GST rate on permanent transfer of Intellectual Property Right (“IPR”) in respect of goods by increasing GST rate from 12% to 18% and made it at par with supply of services.

Before amendment:

12%: Permanent transfer of IPR in respect of goods other than Information Technology software

18%: Permanent transfer of IPR in respect of Information Technology software

The CGST (Rate) Notification can be accessed at: https://www.cbic.gov.in/resources/htdocs-cbec/gst/notfctn-13-2021-cgst-rate.pdf

Similar notification has also been issued under IGST (Rate) and UTGST (Rate) and states/UTs shall issue notification on similar lines

IGST (Rate) Notification: https://www.cbic.gov.in/resources/htdocs-cbec/gst/notfctn-13-2021-igst-rate-english.pdf

UTGST (Rate) Notification: https://www.cbic.gov.in/resources/htdocs-cbec/gst/notfctn-13-2021-utgst-rate.pdf

Our comments:

Temporary transfer Vs. Permanent transfers: Supply of goods or services?

Supply of services: Clause (ii) under Heading 9973 uses the words “Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right. Prima facie, this gives an impression that permanent transfer of IPR shall also be treated as supply of services in GST.

Supply of goods:

  • For period 01.07.2017 to 14.11.2017 – Permanent transfer of IPR covered only under services rate notification in GST and hence to be treated as supply of services.
  • For period 15.11.2017 onwards – Permanent transfer of IPR covered under both goods and services rate notification in GST as services rate notification has not been amended yet to remove the reference of ‘permanent transfer’ of IPRs. Hence, quandary as to taxability of IPRs as goods or services continue to exist in GST regime also.

Since rate of GST to be applied is also different for permanent transfer of IPR being 18%, if treated as ‘supply of services’ and 12%, if treated as ‘supply of goods’, there was an ambiguity as to treatment of same. This is now aligned  for GST rate on permanent transfer of Intellectual Property Right (“IPR”) in respect of goods by increasing GST rate from 12% to 18% and made it at par with supply of services.

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