GST Guidelines: GST lens on financial institution arms utilizing mum or dad’s model title, log or tagline

Some high monetary establishments have come below 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 informed the banks in latest conferences that if a mutual fund unit makes use of any model elements, it ought to pay royalty or related charges to the mum or dad and 18% GST needs to be paid on that quantity, stated individuals with information 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.

At the moment, most banks both don’t cost royalty or receives a commission a set quantity, which is ready to be challenged by the taxman, stated individuals with information of the matter.

Difficulty Raised Earlier

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

The GST value may run into hundreds of crores yearly for giant banks, they stated.

A transaction between associated events, an organization and its subsidiary, is liable even when there isn’t a consideration paid below GST guidelines. Moreover, the tax division is alleged to be arguing that there’s a ‘provide’ going down between the custodians of the model – the financial institution – and its associated occasion, or its subsidiaries together with mutual fund homes. As per GST regulation, ‘provide of name’ is deemed to have taken place from the mum or dad firm to the subsidiary, which is a associated occasion.

“This concern has been below debate for a very long time below 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 accomplice, KPMG India.

“With the present authorities aiming at certainty for companies in numerous contentious points, this may be 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 massive non-public financial institution to supply 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 prices round ₹2 crore yearly from a few of its subsidiaries as royalty or charges to make use of the model title and brand.