The Hindu Business Line : Qualcomm gets notice for service tax on royalty

Royalty discord
Govt says patent holder must pay service tax on royalties collected.
Qualcomm says only device makers, not operators, pay royalty

Mumbai , Aug 3

The Service Tax Department has sent a notice to the Indian arm of the US-headquartered CDMA patent holder Qualcomm, seeking details on its operations and royalty collection in India.

"We have asked Qualcomm India to provide us with details regarding their operations in India (including money collected as royalty on its CDMA patent). We have given them time till Friday," said a senior Service Tax official.

The department has also approached Reliance Infocomm and Tata Teleservices, who are major clients of Qualcomm. "We have asked them to disclose details regarding payment of royalty to Qualcomm," said the tax official, who added, "the financial statements of these companies have not shown any separate allocations for royalties paid to the US-based company." As per rules, the patent holder must pay a certain percentage as service tax on royalties collected. If the patent holder is a foreign company or foreign national, but with no offices or branches on Indian territory, the recipient Indian company (user) has to pay service tax on royalty paid.

But if the patent holder (foreign company) has offices/branches on Indian territory, it must pay service tax on royalty collected.

"If royalty is collected on the basis of IPR (Intellectual Property Rights), Qualcomm (which has offices in India) will have to pay 12.24 per cent on every invoice. But if royalty is collected on the basis of a technical transfer agreement, the company will have to pay only about 5 per cent on every invoice," said a senior service tax consultant at Ernst and Young.

The Corporate Communication Department of Qualcomm said that only handset device makers have to pay "associated royalty" to Qualcomm. "Royalties are paid to Qualcomm by device makers per handset sold, and not operators," Qualcomm said in an e-mail reply to Business Line. "Average royalty paid on devices sold in India over the past 12 months is around 15 per cent lower than royalties that have been paid to Qualcomm in markets like Korea, Japan and the US," the note said.

On net royalty collection from India, the Qualcomm note said, "India accounts for only about 2.2 per cent of our handset royalties."

More Stories on : Telecommunications | Taxation | IPR

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Time-scale modes blamed for monsoon disparities

Pvt role likely in uranium mining

HC reserves order on Hutch plea

Qualcomm gets notice for service tax on royalty

Bharti signs $100-m deal with IBM

Iran-Pak-India gas pipeline project stuck on pricing

Sugar prices, stocks surge on DGFT notification

`Top Indian cos ahead of MNCs'

Jet Airways: In rough weather

Lupin buoyed by expansion plans

SEBI norms for MF overseas investment

`Offshore engg services is the next big thing'