TMI Blog2021 (10) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Deed of Assignment is dated 30th November, 2019, and the Effective Date as stated in the Deed is 10 th December 2019. The application has been filed on 16 th January 2020. Thus, on the date on the filing of the subject application the subject supply was already completed and was neither being undertaken, nor was proposed to be undertaken. - GST-ARA-91/2019-20/B-77 - - - Dated:- 14-10-2021 - SHRI. RAJIV MAGOO, AND SHRI. T.R. RAMNANI, MEMBER PROCEEDINGS (Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under Section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST and MGST Act respectively] by M/s. USV Private Limited, the applicant, seeking an advance ruling in respect of the following questions. 1. Whether in facts and circumstances of the case, the activity of transfer of registered trademarks by Novartis AG to the applicant is a supply of goods or supply or services under the CGST, Act, 2017/IGST Act, 2017? 2. If the activity is held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods or supply of services under the GST law? 2.4 CLASSIFICATION OF PERMANENT TRANSFER OF REGISTERED TRADEMARKS AS SUPPLY OF GOODS OR SUPPLY OF SERVICES. 2.4.1 The term intellectual property right has not been defined either under the CGST Act, 2017 or the IGST Act, 2017. However, under the erstwhile Service Tax regime, the term intellectual property right was defined and Trademark fell under the ambit / meaning of Intellectual property right . 2.5 As per Entry 5(c) of schedule II to the CGST Act, 2017 - temporary transfer or permitting the use of enjoyment of any intellectual property right is defined as a supply of service. Permanent transfer of intellectual property rights is not covered under the said entry. Also, there is no deeming provision under the Act to deem the permanent transfer of Intellectual Property Rights to be a service. As per Entry I(a) of schedule II to the CGST Act, 2017 - any transfer of title in goods is a supply of goods . The term goods has been defined under Section 2 (52) of the CGST Act, 2017 to include every kind of movable property except for the ones excluded. The term movable property has not been defined under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Council in its Meeting held in Srinagar on 18 May, 2017, had approved the rate of tax at 12% on permanent or temporary Transfer of Intellectual Property (IP) right in respect of goods other than Information Technology (IT) software. In order to remove the anomaly with reference to the rate of GST on permanent transfer of IP in respect of goods other than IT software, it was now proposed that Permanent transfer of Intellectual Property in respect of goods other than Information Technology software may be placed in the 6% rate list of goods and an entry may be inserted as Serial No. 243 in Schedule II of the notification No. 1/2017-CT(R) to read as Permanent transfer of Intellectual Property in respect of goods other than Information Technology software , He further stated that the Council in its 18th Meeting held in New Delhi on 30 June, 2017 had approved the rate of 18% on permanent or temporary transfer of IP right in respect of IT software. He added that as a result of this amendment (i) permanent transfer of Intellectual Property right in respect of goods other than Information Technology software would attract 12% GST: and (ii) permanent transfer of Intellectual Property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,06,2017 (as amended) which also provides for list of goods, on which the Integrated Tax required to be discharged by the recipient of supply does not cover the supply of intellectual property rights. 2.11.4 Thus, if the impugned activity of permanent transfer of Trademarks is classifiable as supply of service , IGST will be required to be discharged by the applicant. However, if the activity is classifiable as supply of goods , applicant will not be required to discharge IGST. Applicant Submission Dated 27.09.2021:- 2.12 The subject transaction being a transfer of title in Goods is a supply of goods and not a supply of service and hence payment of GST under reverse charge is not applicable. 2.13 In the subject case, liability may fall upon the applicant should the transaction contained in the subject agreement be held as a supply of service in which case this AAR may be called upon to determine whether the transaction is an import of service which in turn would involve a determination of place of supply . In the case of Sutherland Mortgage Services Inc. v. Principal Commissioner 2020 (35) G.S.T.L. 40 (Ker.), the Hon ble Kerala High Court has observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a transaction cannot be decided based on entries in the exemption or rate notification. The Hon ble CESTAT in the case of L.M. Wind Power Blades (India) Pvt Ltd Vs Commissioner of Customs, Tuticorin, 2015 (327) ELT 641 (Tri-Chennai) has held that Only after classifying the goods into correct chapter headings, under respective chapter of CTA or CETA, the question of extending of notification benefit or rate of duty to be finalised and not vice versa (emphasis supplied). Therefore, classification of the goods has to be first decided as per the provisions of the CGST Act and thereafter the appropriate rate notification (whether for goods or services) to be applied to the transaction in question. 2.20 The subject transaction being a supply of goods cannot be considered as a supply of services and by corollary, the subject transaction will also not come within the ambit of import of service so as to attract GST liability under the reverse charge mechanism. 03. CONTENTION - AS PER THE CONCERNED OFFICER: OFFICER SUBMISSION DATED 27.09.2021:- 3.1 As per the impugned deed of assignment, the Assignor (NAG) is the owner of the said trade marks in India. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cense is a permission given to a person to do or enjoy something that otherwise he does not have the legal right to do or enjoy A licensor does not transfer any proprietary interest to the licensee but the recipient is only allowed to use IPR. Thus, there is no transfer of title/ownership under license agreement. Once title/ownership is transferred, it is considered as assignment resulting into permanent transfer of [PR wherein assignee becomes the owner of the right assigned and can exercise its rights suo moto. 3.7 Since the term permanent transfer is mentioned for both categories viz. goods and service, However, the heading of 9973 reads as Leasing / rental services with or without operator . The heading of 9973 therefore makes clear that the scope of the heading is limited only to the particular services mentioned in the heading. Notwithstanding the broad language of the contents of heading 9973, its scope does not cover services other than those mentioned in the heading. 3.8 Therefore, an assignment is a transfer title of the IPR and treated as supply of goods under GST whereas a license is only permission given for consideration to use IPR, and no transfer of titl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said Trade Marks are registered in the name of NAG under the Indian Trade Marks Act, 1999 and the Trade Marks Rules, 2017 in India. The said Trademarks related to Indian territory are permanently transferred by NAG to USV with effect from the Effective Date as stated in the Deed, and at an agreed consideration. The effective date as per the impugned agreement is 10th December, 2019 OR receipt of the entire consideration amount by the Assignor (in this case, NAG), whichever is later. The applicant has submitted that they have paid full consideration to NAG in two tranches on 04.12.2019 and 05.12.2019 thru Bank transfer. Thus, as per the agreement the effective date of the permanent transfer of the impugned Trademarks is 10th December, 2019. Further, we find that the supply in this case is undertaken by NAG, Switzerland. In other words the applicant is the recipient of the subject supply. 5.3 The first question raised by the applicant is as under:- Whether in facts and circumstances of the case, the activity of transfer of registered trademarks by Novartis AG to the applicant is a supply of goods or supply of services under the CGST, Act, 2017/IGST Act, 2017? 5 4.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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