Introduction

The Directorate General of Goods and Services Tax Intelligence (DGGI) has issued show-cause notices to over a dozen food and beverage companies. It accuses the franchises and outlets of committing trademark infringement by operating in states different from their registered offices.

Report

In early August, the DGGI demanded approximately ₹3,000 crore in unpaid taxes from these businesses. This amount covers the period since July 2017, when GST was introduced. The agency asserts that franchises and outlets operating outside their home states must register separately. They must also pay GST for using trademarks. A senior official clarifies that businesses are obligated to pay taxes for utilizing trademark services. This is true even though franchisees and vendors have been charged brand usage fees without GST.

According to the Central GST law, Schedule 1, Entry 2, transactions between distinct entities within the same organization are taxable. This applies even if no monetary exchange occurs. Consequently, the DGGI has classified the use of a brand by franchisees in other states as a service provided by the main office. This classification makes it liable for GST.

Concluding Statement

As the leading intelligence and investigative agency for GST, Central Excise Duty, and Service Tax matters, the DGGI ensures compliance with Indirect Tax laws. Over the years, it has built a strong reputation for competence and reliability in enforcing these regulations.

Source: The Foodtech Network