Govt. Demands GST on Brands & Logos Some big Indian corporates and foreign banks are under observation for allowing subsidiaries or Indian entities to use brand names and logos they own for free. Govt. wants these entities to put a valuation on the brand names and logos, charge fees from the subsidiary or group company and pay 18% GST on that. The 18% GST levy would likely result in thousands of crores in taxation for companies and banks. However, if the subsidiary is a manufacturing unit, the cost could be offset in some way. Under GST law, a transaction between related parties — a company and its subsidiary or an Indian arm and its parent overseas — is liable even if there is no consideration. This has resulted in the indirect tax department raising demands on the brands and logos that are owned by a holding company or conglomerate but used by subsidiaries and group companies without any payment. Companies that have allowed use of brand, product licenses, logos etc. would have to determine the open-market value of these and pay GST on the same .While shelter may be taken under the ‘deemed to be open-market value’ provisions where full credit is available, the same has not yet been tested in courts. Conglomerates and banks will have to first ascertain the value of their brands or logos, an exercise that many haven’t been done. Charging of GST could be an entirely revenue-neutral exercise as credit may be available to the recipient but if not done, this could result in unnecessary litigation. The situation is different for banks and other financial companies as input tax credit is not fully available to them under the GST framework. The tax department wants the banks to pay 18% GST on the ‘deemed’ value of the brand transactions and pay tax on the fees charged. “The question is conceptually whether there is any supply of any brand, logo, etc. from a foreign office to the Indian recipient. If so, how does one value the supply for usage, etc. This requirement is relaxed where the recipient is eligible to claim credit of the tax charges on supplies. For the banks, a large part of the GST would become pure cost as they would not be able to set it off against future tax liabilities. Tax on logos and brands hadn’t been an issue under the erstwhile tax regime but in the GST framework nothing is entirely free of cost. There were no regulations that dealt with the free supply of services between related parties. Now, such items have an assigned value and hence tax has to be paid on that amount.