GST Rules: GST lens on bank arms using parent’s brand name, log or tagline

Some high monetary establishments have come beneath the taxman’s lens for items and companies tax (GST) on royalty from subsidiaries to be used of the mum or dad’s model title, brand, or tagline. The tax division has instructed the banks in latest conferences that if a mutual fund unit makes use of any model elements, it ought to pay royalty or comparable charges to the mum or dad and 18% GST must be paid on that quantity, stated folks with data of the matter.

The monetary establishments embody

(SBI), , HSBC and amongst others, they stated. , ICICI and Axis did not reply to queries. HSBC declined to remark.

Presently, most banks both don’t cost royalty or receives a commission a hard and fast quantity, which is ready to be challenged by the taxman, stated folks with data of the matter.

Problem Raised Earlier

“You have got equipped companies of brand name title, brand and tagline to your associated individuals, for which no consideration was charged and no invoices have been issued,” in accordance with a February letter by the tax division to one of many giant lenders. ET has seen the missive.

The GST price may run into hundreds of crores yearly for big banks, they stated.

A transaction between associated events, an organization and its subsidiary, is liable even when there is no such thing as a consideration paid beneath GST guidelines. Moreover, the tax division is claimed to be arguing that there’s a ‘provide’ going down between the custodians of the model – the financial institution – and its associated celebration, or its subsidiaries together with mutual fund homes. As per GST regulation, ‘provide of brand name’ is deemed to have taken place from the mum or dad firm to the subsidiary, which is a associated celebration.

“This difficulty has been beneath debate for a very long time beneath completely different tax legal guidelines and entails subjectivity when it comes to valuation, or whether or not there exists an precise switch of rights for tax levy,” stated Abhishek Jain, tax companion, KPMG India.

“With the present authorities aiming at certainty for companies in numerous contentious points, this is also seemed to be explicitly clarified by the federal government with particular credence given to on-ground realities.”

The I-T division has requested one other giant non-public financial institution to offer audited stability sheets for 2018 to 2021, together with details about joint ventures, related corporations and complete annual revenue of every of those. The financial institution fees round ₹2 crore yearly from a few of its subsidiaries as royalty or charges to make use of the model title and brand.