Hi
Our Organisation is into Franchise Business. We are appointing Franchises all over India, entering into a License Agreement with the Fanchises.
We will render services only to our franchises like Project Support / Marketing Support / Operational Support / IT support etc.
While signing we will collect the Initial License fee along with Service Tax and the same was getting remitted with Service Tax Authorities.
Also we are collecting Royalty from the Franchises on monthly Gross Sales by some percentage which will vary between 4% to 6%. The same will be collected along with Service Tax and the same was remitting again with Service Tax authorities as and when we collect the amount from our franchises.
Recently the Commercial Tax Department has issued a notices to our organisation that Franchises Services comes under VAT and hence you are liable to pay VAT on the franchises Services with effect from 1.4.2005 onwards, accordingly the issued the Notices as
For State related services VAT and for rest of India Services CST.
We protested saying that since we are paying Service Tax on the same amounts, how come you expect us to pay the VAT / CST on the same services.
But still they didn't agree with our arguments and pulled our organisation into the Court of Law.
When we filed a petition of challanging the Tax authorities, the High Court has advised our organisation to pay as DEPOSIT of 50% of the demanded amount and accordingly our organisation has remitted the 50% of the amount with the concerned authirities and fighting the issue with the Commercial Tax department.
Pls clarity whether we need to pay both Service Tax and Vat also on the services rendered to our franchises.
Pls clarity
Regards
Murthy
Our Organisation is into Franchise Business. We are appointing Franchises all over India, entering into a License Agreement with the Fanchises.
We will render services only to our franchises like Project Support / Marketing Support / Operational Support / IT support etc.
While signing we will collect the Initial License fee along with Service Tax and the same was getting remitted with Service Tax Authorities.
Also we are collecting Royalty from the Franchises on monthly Gross Sales by some percentage which will vary between 4% to 6%. The same will be collected along with Service Tax and the same was remitting again with Service Tax authorities as and when we collect the amount from our franchises.
Recently the Commercial Tax Department has issued a notices to our organisation that Franchises Services comes under VAT and hence you are liable to pay VAT on the franchises Services with effect from 1.4.2005 onwards, accordingly the issued the Notices as
For State related services VAT and for rest of India Services CST.
We protested saying that since we are paying Service Tax on the same amounts, how come you expect us to pay the VAT / CST on the same services.
But still they didn't agree with our arguments and pulled our organisation into the Court of Law.
When we filed a petition of challanging the Tax authorities, the High Court has advised our organisation to pay as DEPOSIT of 50% of the demanded amount and accordingly our organisation has remitted the 50% of the amount with the concerned authirities and fighting the issue with the Commercial Tax department.
Pls clarity whether we need to pay both Service Tax and Vat also on the services rendered to our franchises.
Pls clarity
Regards
Murthy