Payment of goodwill on transfer of business not business auxiliary services

Goodwill comes under Intellectual property services and not under business auxillary services and service tax is imposable as per the below definition given by CBEC.

Intellectual property services (other than copyrigh
ts) –
(1) Intellectual property
emerges from application of intellect, which may be
in the form of an invention, design,
product, process, technology, book, goodwill etc.
In India, legislations are made in
respect of certain Intellectual Property Rights (i.
e. IPRs) such as patents, copyrights,
trademarks and designs. The definition of taxable
service includes only such IPRs
(except copyright) that are prescribed under law fo
r the time being in force. As the
phrase ‘law for the time being in force’ implies su
ch laws as are applicable in India, IPRs
covered under Indian law in force at present alone
are chargeable to service tax and
IPRs like integrated circuits or undisclosed inform
ation (not covered by the Indian law)
would not be covered under taxable services.
(2) A permanent transfer of intellectual property
right does not amount to rendering
of service. On such transfer, the person selling t
hese rights no longer remains a ‘holder
of intellectual property right’ so as to come under
the purview of taxable service. Thus,
there would not be any service tax on permanent tra
nsfer of IPRs.
(3) In case a transfer or use of an IPR attracts ce
ss under Section 3 of the Research
and Development Cess Act, 1986, the cess amount so
paid would be deductible from
the total service tax payable
(refer Notification No.17/2004-S.T., dated 10-9-200
4).
[ C.B.E &C Circular No.80/10/2004-S.T dated 17.09.2
004 ]