Financial Daily from THE HINDU group of publications
Sunday, Jul 31, 2005
Financial Daily from THE HINDU group of publications Sunday, Jul 31, 2005 |
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Industry & Economy
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Taxation Marketing - Channels and Franchises Franchise services — Licence production agreements to come under service tax net K.R. Srivats
New Delhi , July 30 THE Finance Ministry has expanded the scope of levy of service tax on franchise services. The Revenue Department has clarified that licence production agreements, where a principal allows production of goods bearing his brand name by another person, would be covered under the purview of service tax under franchise services. Similarly, if rights are granted for rendering services identified with the principal on his behalf, then such services by the principal to the service recipient would also attract service tax. A senior Finance Ministry official said licence production agreements have been brought under the service tax net in view of the recent amended definition of `franchise'. The Finance Ministry had, with effect from June 16 this year, amended the definition of `franchise' to ensure comprehensive coverage of franchise services for service tax purposes. `Franchise' was defined as an agreement by which the franchiser grants representational rights to the franchisee to sell or manufacture goods or provide service or undertake any process identified with the franchiser, by any symbol such as trade mark, service mark, trade name or logo. It was specified that no other condition was required to be fulfilled for levy of service tax. Prior to this amendment, franchise services were liable to service tax only when the agreement between the franchiser and the franchisee satisfied all of the four specified conditions. Tax on DTH: Meanwhile, the Finance Ministry has also made it clear to its field formations that the provision of direct to home (DTH) signals by broadcasting agencies to customers would attract the levy of service tax. The liability for payment of service tax in case of broadcasting agencies or organisations having their head office outside the country would be on the branch office, subsidiary or any representative or agent appointed by such agency or organisation in the country, the revenue department has clarified.
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