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subsidiaries of a parent company or related party could lead to litigations and hit the earnings of these firms, experts said.With the
government forming a high-level committee to review the indirect tax structure, tax experts hope the issue of imposing GST on brand usage by
related parties would also be addressed.At present, a large number of companies allow their subsidiaries or a related party to freely use
Since this does not involve any payment, no GST is levied.The GST authorities, however, want companies to charge for brand and logo usage
The tax department wants the companies to put a value to their brands, charge related parties for the brand usage and pay 18 per cent
GST.While maintaining that tax authorities are right in demanding tax on usage of brand names and logos, experts said that there are several
They maintain that bigger companies may not have any problem in putting a value to brand usage by related parties, but smaller firms with
large number of subsidiaries could face problems."Legally it is right but logically not
The law says that any supply of service between related parties is taxable," said Rajat Mohan, Senior Partner, AMRG - Associates.Tax experts
said that levy of tax on usage of brand name for a royalty has been a bone of contention between Value Added Tax and Service Tax authorities
in the past as well.As per the indirect tax law, companies are now required to assign a value wherever they allow usage of brand names,
to a related entity.Amit Bhagat, Partner, Dhruva Advisors, said that valuation of a brand or logo usage would not be a challenge wherever
full input tax credit is available to recipient but a cost where such credit is limited or disallowed for certain business like
banks."Largely this would be an unexpected and unplanned tax cost as such and likely to become litigous, at least for such business
entities," Mr Bhagat said.(This story has not been edited by TheIndianSubcontinent staff and is auto-generated from a syndicated
feed.)Follow TheIndianSubcontinent for latest election news and live coverage of assembly elections 2019 in Maharashtra and
