In re Yum Restraunts (India) Pvt. Ltd. (GST AAR Haryana)
Q1. Whether the services provided under technology license agreement entered into by the applicant will qualify under service accounting code 9973 which provides for ‘temporary or permanent transfer or permitting the use of enjoyment of intellectual Property (IP) right in respect of goods other than information Technology software’ attracting GST @12% or under service accounting code 9983 which inter alia provides for franchise service taxable at the rate of 18%.
(a) Under service accounting code 9973 which provides for “temporary or permanent transfer or permitting the use of enjoyment of intellectual property (IP) right in respect of goods other than information technology software” as provided under clause (c) of entry 5 os schedule II taxable at the rate of 12% in terms of serial number 17 of Notification No. 11/2017-CT (Rate) dated 28.06.2017.
OR
(b) Under Service accounting code 9983 which inter -alia provides for franchise service taxable rate of 18% in terms ofNotification No. 11/2017 -CT (Rate) dated 28.06.2017.
Answer 1: classification code/heading 998396 does not cover the activity of licensing right to use trademarks and franchises, as the same is covered vide classification code/chapter heading 997336. Further, Group 99733 covers Licensing services for the right to use intellectual property and similar products. Therefore, licensing services: for right to use the “system” and “system property” in respect of which advance ruling has been sought in the instant case [even if “marks'” have been taken out of arnbit of this advance ruling due to reasons that there is separate agreement for right to use the same this agreement does not cover right to use “marks”), being right to use intangible property which is similar to copyright, patents, trademarks, designs, which is also capable of being possessed, transferred and their right to use can be licensed, merits’ classification under the group 99733.
In terms of clause (c) of pare 5 of Schedule Il.of the Central Goods and Service Tax Act, 2017, the impugned activity right to use “system” and “system property” is right to use intellectual property which merits classification under code 9973′ [Serial number 232′ (for heading 9973)& 250 (for group 99733) of annexure to ‘Notification No.11/2017-CT dt.28.06.17] and the same is covered vide serial number 17(i) of Table to the said notification, chargeable to CGST @ 6% and. SGST @ 6%
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, HARYANA
1. Mis Yum ReStrauntS (India) Pvt Ltd., ‘Tower-Di Global. Business Park, 12th Floor, MG Road, Gurugram, Haryana[hereinafter referred to as the “ApPlicantl, is the owner of various tradernarks, service marks and. trade ‘names and has a comprehensive restaurant system for the preparation, marketing and sale of certain quality-food, products under the various trademarks Owned by them.
2. The Applicant has entered into a technology license agreement with its’ franchisee (herein called as the Licensee) across India, wherein’the Applicant haS granted the Licensee the right to use the system,. the system property and marks for the term, solely in connection with the conduct of butinesS at the outlet and subject to terms and conditions of the agreement. “
3. The aforesaid three rights granted to the Licensee are detailed below:
a. Right to. use the .Systems-‘The System is a comprehensive restaurant system for retailing of a limited menu of uniform and quality food products, with emphasis ‘on prompt and courteous behavior and wholesome atmosphere. The System is meant ‘for providing standards and policies to’ Licensee’s for uniform operatiOn of all restaurants within, the System. These includes but are not limited to, serving designated food and beverage products; the use of only prescribed equipment and building layout and design, strict adherence to designated food and beverage specification’s and to prescribed standards of quality, service and cleanliness in restaurant operations.,
b. Right to use System Property- –
i.-The term System Property has been d:efiried to mean the contents of , the manuals and all other knowhow, information, specification, Systems and: data used by the’AppliCant or in respect of the System.
ii. The tern Manual has’ been defined to mean the manuals, notices and correspondence published or issued from time to time -by the Applicant in any form, Containing the standards and other requirements, rules, procedures and guidelines relating to the System.
iii. The term Standards has , been defined to Mean the standards, specifications and other—requirements of the System as determined, changed or added to by the- Applicant from time to time including without limitatiOn the standards, specifications and other requirements related to the ‘preparation, marketing sale of the approved products, customer service procedure,. the design, decor and fitout of the outlet, the equiprnent at the outlet and the content, quality and use of advettising and promotional materials.
