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In the current scenario, the goodwill attached to the brands is an essential guiding factor for the consumers to decide on the purchase of the brand products. A brand is protected by one of the most important intellectual property rights (IPR), which is known as ‘trademark.’ Intellectual Property rights, though being in an intangible form, significantly increase the value of goods and also provide various rights and also the remedies for protecting its position in the market full of competition. If a person gets his brand name registered, he gets exclusive rights to use such brand name and file a suit for infringement of his registered trademark or brand name. This article describes the Applicability of GST on Brand Names.
Even the unregistered brand names have got certain equitable rights which can be enforced in a court like that of remedy against passing off. It also prevents misrepresentation of his goods or services. Gradually, a brand name is getting due importance in the GST regime as well. The GST regime has brought confusion regarding the difference in the rates of tax levied on the supply of branded and unbranded goods and services. It is also observed that there is no difference between branded and unbranded services, even though a brand name can be registered as a trademark.
Table of Contents
The provisions related to GST on brand names have been enumerated in Notification No-01/2017-Central Tax (Rate) dated 28th June 2017. Some of its elements are explained below:
Unit Container: The phrase “unit container”
here means a package, either a large or small (for example, can, tin, box,
bottle, jar, bag, or carton, barrel, drum, or canister that was designed to
hold a fixed quantity or number, which is indicated on such package.
According to the phrase, ‘registered brand name means a brand name or trade name, which can be a name or a mark such as a monogram, symbol, label, signature or any invented word or writing which is used with respect to such specified goods to indicate or to determine a connection during the course of trade between the specified goods and some individuals using the mark or name with or without indication of the identity of that individual, and which has been registered under the Trade Marks Act, 1999. The brand name also means:
Many small traders and companies applied for the deregistration
of their brands in the Trademark Registry offices because the registered brand
name was taxable under GST. For many traders/ dealers in this situation, it
became very difficult to decide whether to save taxes or to preserve the rights
attached to its brand name. The GST council addressed this issue by providing
that the traders can get rid of paying the GST only if they opt to forego any
actionable claim or their brand name by filing an affidavit. But the dilemma
among the traders still continues as to weight the option of saving 5% GST or
to forego its trademark rights relating to its brand name. Further, the
Ministry of Commerce is also concerned that the deregistering of trademarks may
lead to fake products in the market, which could create a health hazard in the
By exempting the unbranded products, even those
companies which have a boosting revenue but have not registered their brands
get benefitted. On the other hand, the benefit can be provided on the basis of
loose food items or packaged food items irrespective of the branding of such
products to avoid any type of faults.
There were reports that the businesses selling branded food were deregistering their brands to get the exemption benefit by surrendering their registered brand names without giving due weightage to the value of their intellectual property rights. Hence when the GST council after the introduction of this notification met on 9th September 2017 to discuss on issues continuing after GST implementation, tax rates on around 134 products were reviewed, and some changes were made on rates with respect to GST on brand names with respect to GST on brand names (branded and unbranded products).
Moreover, as per Notification No. 34/2017-Central
Tax (Rate) and 35/2017-Central Tax (Rate) dated 13th October 2017, provided the
procedure for filing an affidavit where the individual having an enforceable
right or an actionable claim over the registered brand name and the person
undertaking packing of the goods are two different persons. It is significant
to mention that even if the brand is unregistered, there remains an enforceable
right/remedy in the nature of passing off right is available to a prior user of
such a brand. Still, clarification on the validity of the affidavit and for
opting out of the exemption by cancelling the effect of the affidavit needs to
be given by the GST Council.
lies that the name of the manufacturer is to be printed on a packaged product.
These remain in compliance with the Legal Metrology Act, 2009, FSSAI Act etc.
The question that occurs is whether the printing of the name of the
manufacturer as statutory compliance may require the registered /unregistered
person to submit the affidavit of preceding its rights. The manufactures name
here will be considered as a brand name.
In this case, the
Supreme court held that the words brand name suggests a mark, design, symbol,
or title, which differentiates itself from other manufacturers which, when uses
a particular product would generate a connection between the product and the
manufacturer. It was also pointed out that if the manufacturer’s name in every circumstance
can be considered as a brand name and then there will be no such things as
unbranded items. The seller’s identity cannot always be equated to a brand
name. The trademark law does not prevent any person from adopting his name or
surname as a trademark in connection with his trade, prima facie, such a brand
should be “capable of differentiating the goods or services of the person from
others having the same name or surname. A manufacturer or trader desires
typically to use as a mark something associated with his name. Generally, he
does not use as a trademark his full personal or business name but an inherent
part of such title, an abbreviation, or just a surname. But this genuine desire
or interest on his part must be reconciled with the hope or benefit of a
competitor to use any identical or same personal or business name/ abbreviation/
surname. Whereas, a trade name means a name under which goods are sold by a
particular person and which, by its established usage, has become known to the
public as indicating that those goods are of any particular person. In fact, it
is prevalent for trade names to be used as trademarks, and the law permits
registration of trade names as brands. However, the basic applied test is:
Whether any other businessperson will use this name. Hence, the intention
should be made clear that all persons selling unbranded products are not put in
any type of inconvenience because cannot be such that all such persons who sell
unbranded products as they are supposed to affix their names. Looking at this,
a clear difference must be established between the name of the company or
manufacturer and a brand name.
It was observed in the above case that the
goods bearing the name and address of the manufacturer, according to the
statutory requirement could not be considered as not taking a brand name.
Reliance was placed by authority on the
decision in case of Commissioner of Central Excise, Trichy vs Grasim Industries
Ltd [2005 (183) E.L.T. 123 (SC)], where it was held that even the name of some
other company, also if it was used to indicate a connection between the product
and the company would be a sufficient clause to constitute a brand name. It was
also asserted that the said decision taken by a three-member bench of the
Honourable Supreme Court would have precedence over the decisions of the
Honourable Supreme Court in case of Tarai Foods.
Some of the foreign banks as well as Indian
conglomerates are questioned by the Government for allowing their Indian
entities and also subsidiaries which use their brand name for free. The
indirect taxes department wants such organisations to charge a valuation on
their brand names and logos and charge fees accordingly. The Government intends
to charge 18% GST for such entities.
The companies under the radar are banks inclusive of
Citi Bank, HSBC Bank, ICICI along with other conglomerates such as Tata Groups
and Mahindra’s. The tax department had asked written inquiry to some companies
and had also issued preliminary notices to some foreign established banks. The
TATA group and HSBC did not reply or give their comments while other companies
are also on the verge of confusion as to what should they reply.
According to financial experts, if this GST gets
implemented, then the companies and foreign banks will have to pay thousands of
crores in the form of tax after imposing the charges. However, the subsidiary
companies may have to pay less in case it is a manufacturing unit.
The foreign banks or conglomerates needs to check
the value of their logos or brands since many of them might not know its cost.
Our professionals in Enterslice can help your brand get trademark registration as well our GST experts will help in getting your GST registration done. We have a team of GST experts who will help you in filing of GST Returns during the process.
Despite the public view and the existing confusion
regarding branded goods, to an extent, it is clear that using a reputed brand
will attract taxes. The consumer’s gains confidence regarding the product
quality on the branded products. By widening the meaning of a registered brand
name, the benefit of exemption cannot be granted to a various sellers who sell
packaged foods who have a brand name but have not yet applied for trademark by
submitting the affidavit. Moreover, many big institutions may not be willing to
risk a brand by abandoning all the rights along with it to it to save 5% GST on
brand names. The intention of law for providing the level playing field to all
its participants in the market is very clear. However, the Government still
needs to sort the additional issues connected with this point. Most
importantly, all the small scale traders claiming their exemption for their
products can submit the affidavit as a precautionary measure.
Read, Also: Government Expected to Impose GST on Brand Names and Logos.
Deepti is a Law graduate with an avid interest in reading and very proficient in summarizing legal cases. She has enough experience in handling legal affairs of the company. In the initial days of her career, she has worked as a legal researcher and has 3+ years of experience.
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