Permanent transfer of Intellectual Property (IP) right attracts 18% GST

The CBIC vide Notification No. 13/2021-Central Tax (Rate) dated October 27, 2021 has further amended Notification No. 01/2017- Central Tax (Rate) dated June 28, 2017 to align GST rate on permanent transfer of Intellectual Property Right (“IPR”) in respect of goods by increasing GST rate from 12% to 18% and made it at par with supply of services.

Before amendment, the existing rate was :

12%: Permanent transfer of IPR in respect of goods other than Information Technology software

After amendment, the rate is :

18%: Permanent transfer of IPR in respect of Information Technology software

Thus, CBIC amends Notification No. 01/2017- Central Tax (Rate) dated June 28, 2017, and increases the rate from 12% & 18% against S. No. 243 and S. No. 452P respectively.

As Describing the Term :

Temporary transfer Vs. Permanent transfers in respect of Supply of goods or services :

Service provision:

The phrases “temporary or permanent transfer or authorising the use or enjoyment of Intellectual Property (IP) right” appear in Clause (ii) of Heading 9973. At first glance, this appears to imply that permanent transfer of IPR will be viewed as a supply of services under GST.

Supply of goods:

For the period of 01.07.2017 to 14.11.2017, permanent transfer of IPR is solely covered by the GST services rate notification and is thus classified as a supply of services.

Permanent transfer of IPR is covered under both the goods and services rate notifications in GST from 15.11.2017 onwards, as the services rate notice has not yet been modified to remove the reference to ‘permanent transfer’ of IPRs. As a result, the question of whether IPRs are taxable as goods or services persists in the GST regime.

To Read Official Notification Download PDF Given Below :