Value Added Tax: Is it now VAT? Businesses face tax demands worth Rs 30,000 crore

State tax authorities have issued notices to around 200 companies, including Colgate-Palmolive, L'Oréal, Castrol, Saint-Gobain, Whirlpool, Mastec, Domino's Pizza and McDonald's India, seeking tax under the pre-Goods and Services Tax (GST) regime. It was sent. . These companies have filed suit in various high courts and even the Supreme Court, arguing that the same item cannot be taxed as both a “goods” and a “service.”
States levy value-added tax (VAT) on transfer of intellectual property rights (IPRs) and collected around Rs 30,000,000,000,000 rupees in taxes between FY 2011 and FY 2015, people familiar with the details told ET. I'm looking for it. The notification was sent within the last 6 months.

GST, which replaced VAT and several other indirect taxes, was introduced on July 1, 2016.

Some of those who received these VAT notices stated that they had already paid service tax on these transactions.

Various state authorities treat these intellectual property rights as “commodities” and impose value-added taxes on them.

The companies said that a number of states including Maharashtra, Uttar Pradesh, Madhya Pradesh, Tamil Nadu and Gujarat have sent such notifications, adding that “states have not yet implemented post-GST regulations on intellectual property taxation”. We are aware of the position,” one of the appellants told ET. “But they want to increase their income from past issues.” Under the GST regime, intellectual property rights cannot be permanently transferred if they are treated as “supply of services” or “supply of goods.” is subject to 18% GST. Ambiguity regarding this issue.

This issue is before the Supreme Court.

“This is a pre-GST period demand raised by state tax authorities and we are aware of the complex situation,” a senior Central Board of Indirect Taxes and Customs (CBIC) official told ET. “However, as this matter is currently before the court, we will await the court’s guidelines.”

“I'm concerned”
Legal experts said goods cannot be treated as both goods and services and taxed twice.

“The controversy regarding the dual application of value added tax and service tax has become a matter of great concern to various businesses, especially when the transaction concerns the franchisee's services,” argues the taxpayer. said Abhishek A. Rastogi, founder of Rastogi Chambers. The application of both taxes was challenged before the Supreme Court and the Bombay High Court.

“Taxpayers have already exempted themselves from service tax, but the VAT authorities intend to take back the value added tax on the same transaction, so the issue is whether the same transaction is taxed as both goods and services. Rastogi said.