View of STUDY ON INTELLECTUAL PROPERTY RIGHTS UNDER GST LAW

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ACCENT JOURNAL OF ECONOMICS ECOLOGY & ENGINEERING Peer Reviewed and Refereed Journal, ISSN NO. 2456-1037

Available Online: www.ajeee.co.in/index.php/AJEEE

Vol. 06, Special Issue 04, (ICESD-2021) June 2021 IMPACT FACTOR: 7.98 (INTERNATIONAL JOURNAL) 53 STUDY ON INTELLECTUAL PROPERTY RIGHTS UNDER GST LAW

1Prachi Chourasia, ²Dr. Sarita Rana

1Research Scholar, School of Commerce, DAVV, Indore

2Assistant Professor, St. Paul Institute of Professional Studies, Indore

Abstract - Prior to the Goods and Services Tax (GST) regime, the Union government imposed a tax on transactions involving Intellectual Property (IP) rights if they were classified as services (under Service Tax, Chapter V, Finance Act, 1994), whereas state governments imposed a tax on IP rights if the transaction involved a sale/deemed sale of goods. With the introduction of GST, the need to categorise IP transactions as either service or sale/deemed sale of goods was eliminated. GST is a destination-based consumption tax, which means that the tax is collected by the state where the goods or services are consumed rather than the state where they are manufactured. On this paper we study on GST law on Intellectual Property Rights.

Keywords: GST, IPR, Intellectual Property Rights, GST Law.

1 INTRODUCTION

1.1 What is Intellectual Property Right

The mind creates intellectual property. When compared to traditional property such as land or goods, the intangible nature of intellectual property presents difficulties. It is a type of property that is not physically tangible but is nonetheless legally protected. Unlike traditional property, intellectual property is “indivisible,” because an unlimited number of people can “consume” an intellectual good without depleting it. Mind creations include inventions, artistic or literary creations, names, symbols, images, and so on. There are two types of intellectual property:

 Industrial Property: Patents, trademarks, geographical indications, industrial designs, and other forms of intellectual property fall under this category.

 Copyright: Copyright protection extends to artistic and literary works. Novels, textbooks, songs, photographs, movies, and so on are all examples.

The importance of intellectual property was first recognised in 1883 with the Paris Convention for the Protection of Industrial Property, followed in 1886 by the Bern Convention for the Protection of Literary and Artistic Works.

1.2 Types of Intellectual Property Right

Intellectual property is classified into five major types:

1. Geographical Indication: A geographical indication (GI) is a name or sign used on goods that have a specific geographical origin and possess qualities or a reputation that are due to the place of origin. The agricultural industry is the primary user of geographical indications. Such as Darjeeling tea or Kashmiri green apples. They convey the product's quality due to its origin. It is regarded as intellectual property

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ACCENT JOURNAL OF ECONOMICS ECOLOGY & ENGINEERING Peer Reviewed and Refereed Journal, ISSN NO. 2456-1037

Vol. 06, Special Issue 04, (ICESD-2021) June 2021 IMPACT FACTOR: 7.98 (INTERNATIONAL JOURNAL) 54 that must be protected in order to prevent commercial operators from misrepresenting themselves.

2. Copyright: Copyright is a legal term that refers to the legal protection of an author's work. It is a type of intellectual property that grants the author exclusive rights to publication, distribution, and usage. Copyright can be used to protect a wide range of content. Books, poems, plays, songs, films, and artwork are all examples.

Copyright protection has now been extended to websites and other online content.

3. Industrial Designs: According to Indian law, under the Design Act of 2000, Industrial Design protection is a type of intellectual property right that grants selected people the exclusive right to make, sell, and use articles that embody the protected design. Industrial designs are primarily ornamental in nature, and they can be two-dimensional or three-dimensional in nature. In most cases, the aesthetic value of these designs exceeds the practical value.

4. Trademark: A trademark is a distinct indication that certain goods or services were provided by a specific company or individual. Long ago, artists and craftspeople left unique marks or signatures on their products, which gave rise to the concept of a trademark.

Trademark is defined in the Trademark Act, 1999 as, “trademark means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include the shape of goods, their packaging and combination of colours.”

5. Patent: Patents are rights granted to inventors by the federal government and allow inventors to exclude others from the manufacture, sale or use of their inventions for a period of time. The patent system is designed to promote unique and useful inventions in society. The protection of these patents is provided to the patentee for a limited period of 20 years.

1.3 GST Law

GST stands for Goods and Services Tax. It is an indirect tax that has largely replaced many other indirect taxes in India, including excise duty, VAT, and services tax. The Goods and Services Tax Act was passed by Parliament on March 29, 2017 and went into effect on July 1, 2017. Under the GST regime, the tax is levied concurrently by the Central and State/Union Territory Governments, and it is levied on the Supply of Goods or Services or both. The tax is levied at every point of sale under the GST regime. In the case of intra-state sales, both Central GST and State GST are levied. The Integrated GST applies to all interstate sales.

Intellectual Property (IP), according to the World Intellectual Property Organization (WIPO), refers to mental creations such as inventions, literary and artistic works, designs, and symbols, names, and images used in commerce. These are typically in the form of trademarks, copyrights, patents, and industrial designs, among other things.

2 LITERATURE REVIEW

Susanta Kumar Rout, “A brief review on intellectual property rights with special attention on patent”, “Journal of Applied and Advanced Research, 2018 ISSN 2519-9412 conclude that the Intellectual Property Rights is one of the cornerstones of modern economic policy making both at the national and international levels. It is increasingly becoming an important tool for sustainable development in today’s knowledge-based society. Creativity and innovation have been a constant in growth and development of any knowledge economy. Creativity and innovation are stimulated by Intellectual Property for the benefit of all. With Intellectual Property Rights (IPRs) increasingly influencing trade both at the national and international level; harnessing trade benefits depends on the degree of protection enjoyed by the owners of the IPRs.

Sagar Kishor Savale, “Intellectual Property Rights”,“World journal of pharmacy and pharmaceutical sciences”, 2016 ISSN 2278-4357 Volume 5, Issue 6 conclude that Intellectual Property Right is Government Right is granted by the Government of India.

Intellectual Property right is concerned with intellectual activity in industrial, scientific, literary & artistic fields. These rights Safeguard creators and other producers of intellectual goods & services by granting them certain time-limited rights to control their use. The

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ACCENT JOURNAL OF ECONOMICS ECOLOGY & ENGINEERING Peer Reviewed and Refereed Journal, ISSN NO. 2456-1037

Vol. 06, Special Issue 04, (ICESD-2021) June 2021 IMPACT FACTOR: 7.98 (INTERNATIONAL JOURNAL) 55 rights given to people over the creation of their minds. They usually give the creator an exclusive right over the use of his/her creations for a certain period of time.

Nisha Desai, “Intellectual Property Law in India”, “Legal, Regulatory & Tax”, July 2015 hat conclude that the importance of IPR and their protection is acknowledged the world over as essential to business. In tune with the world scenario, India too has recognized the value of IP, which recognition has been consistently upheld by legislators, courts and the industry. India is now a signatory to various IP treaties and conventions.

This has helped India become more attuned to the world’s approaches and attitudes towards IP protection. India has already taken steps to comply with its obligations under TRIPS, and the Indian IP law regime is almost at par with the regimes of many developed nations. Historically, the enforcement of IPRs in India was not particularly effective.

2.1 Taxability of Intellectual Property Under GST Law

Intellectual property is an intangible right of its owner, which frequently causes confusion regarding its taxability whenever such right is transferred. Section 9 of the CGST Act, 2017 states that CGST will be levied on the value determined under Section 15 of the same act on all intra-state supply of goods or services or both at the rates notified by the government based on GST council recommendations.

2.2 Rates in Relation to Intellectual Property

Section 9 of the CGST, 2017 [corresponding section 9 of the SGST] states that the CGST (or SGST, as the case may be) shall be levied on the transaction value or the price actually paid or payable for the said supply of goods and/or services, and at such rate to be notified based on the GST Council's recommendations. As a result, the rates are as follows:

Under Sl. No. 17, Heading 9973-

 Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of goods other than Information Technology software at the rate of 12% (6% CGST and 6% SGST).

 Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of Information Technology software at the rate of 18%

(9% CGST and 9% SGST).

“Information Technology software” refers to any representation of instructions, data, sound, or image, including source code and object code, that is recorded in machine readable form and capable of being manipulated or providing interactivity to a user via a computer, an automatic data processing machine, or any other device or equipment.

 Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment, or other valuable consideration at the same rate of central tax as on supply of like goods involving transfer of title in goods.

 Any transfer of a right in goods or an undivided share in goods that does not involve a transfer of title in goods is subject to the same rate of central tax as a supply of like goods involving a transfer of title in goods.

2.3 Brief Analysis

It is worth noting that, under the GST regime, the permanent transfer/sale of a specific intellectual property right would be considered a supply of service, and a 12 percent tax (6 percent CGST and 6 percent SGST) would be levied on the transaction price, provided that such IPR did not relate to software. Temporary transfer or permission to use or enjoy any IPR (licence or assignment) would be taxable at the same rate as long as it did not relate to IT software.

Previously, permanent transfer was not considered declared service and thus was not subject to service tax. It should also be noted that previously, the exclusivity test (whether the transfer / assignment / license was exclusive to the transferee) as laid down in the BSNL judgment was the standard for determining whether the transfer amounted to a sale (and thus subject to sales tax) or a licence (and hence, subject to service tax). Under the GST, it makes no difference whether the transfer is exclusive or temporary for the purposes of taxation because it will be subject to the same concurrent tax.

It is also pertinent to note that sale or licensing of intellectual property pertaining to software would be charged 18% tax (9% CGST and 9% SGST). Even though GST has done

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ACCENT JOURNAL OF ECONOMICS ECOLOGY & ENGINEERING Peer Reviewed and Refereed Journal, ISSN NO. 2456-1037

Vol. 06, Special Issue 04, (ICESD-2021) June 2021 IMPACT FACTOR: 7.98 (INTERNATIONAL JOURNAL) 56 away with the need to classify transactions in respect of goods and services, the Centre has in a way reversed the TCS judgment which had held that transactions relating to shrink wrapped software (software bound with product) was to be considered as transfer of the right to use such software goods (and hence deemed sale of goods) while the same is to be treated as service due to the notification.

It should also be noted that the Constitution (One Hundred and First Amendment) Act, 2016 [by which the GST was introduced into the constitutional framework] did not amend Article 366(29A) (d), which states that the transfer of the right to use any goods is deemed to be a sale of those goods. However, with the aforementioned notification, the Centre, in addition to notifying the taxation rate, has inadvertently classified the transfer of the right to use any goods as a service.

3 CONCLUSION

Under the GST regime, the permanent transfer/sale of a specific intellectual property right would be considered a supply of service, and a 12 percent tax would be levied on the transaction price provided that such IPR did not relate to software. It is also pertinent to note that sale or licensing of intellectual property pertaining to software would be charged 18% tax. Under the GST, it makes no difference whether the transfer is exclusive or temporary for the purposes of taxation because it will be subject to the same concurrent tax.

REFERENCES

1. https://www.lexology.com/library/detail.aspx?g=ed3aca08-80ba-4d26-8af8-17fcce7432ef

2. https://taxguru.in/goods-and-service-tax/gst-liability-intellectual-property-ipr-related-services.html 3. https://cleartax.in/s/intellectual-property-rights

4. https://techterms.com/definition/copyright

5. https://yourstory.com/2015/07/what-is-industrial-design-protectiontheir-designs/amp 6. https://www.findlaw.com/smallbusiness/intellectual-property/what-is-a-patent.html

7. https://www.researchgate.net/publication/325315398_A_brief_review_on_intellectual_property_rights_wi th_special_attention_on_patent