What is the GST rate on brand name and trademark licensing in India?

Licensing services for the right to use intellectual property (including brand names, trademarks, patents, and software) are classified under SAC 9973 and attract a uniform 18% GST (9% CGST + 9% SGST or 18% IGST). Following GST Council rationalizations, both permanent transfer and temporary licensing of intellectual property rights attract 18% GST.

Is a holding company required to pay GST for allowing subsidiaries to use its brand name?

Yes. Under Section 7(1)(c) read with Schedule I (Entry 2) of the CGST Act, supply of services between related persons in the course or furtherance of business is treated as a taxable supply even if made without consideration. Where a parent company permits subsidiaries to use its brand name, it constitutes a deemed supply of service valued under Rule 28, attracting 18% GST cross-charge.

Can the licensee claim Input Tax Credit (ITC) on trademark royalty payments?

Yes. Royalty payments made for the commercial use of a brand name, franchise, or trademark are incurred in the course or furtherance of business under Section 16(1). The licensee can claim 100% ITC of the 18% GST paid, provided the invoice is reflected in Form GSTR-2B and payment is made within 180 days under Section 16(2).

Does Reverse Charge Mechanism (RCM) apply when paying trademark royalties to an overseas licensor?

Yes. Under Notification No. 10/2017-Integrated Tax (Rate) Entry 1, any service supplied by any person who is located in a non-taxable territory to any person other than a non-taxable online recipient is taxable on reverse charge basis. The Indian company must pay 18% IGST in cash through electronic cash ledger and can claim 100% ITC in the same month.

GST on Brand Names & Trademarks: Licensing, Assignment, Valuation & RCM Rules

Comprehensive statutory guide to GST on intellectual property, brand names, and trademarks in India. Master HSN 9973 18% GST rate, permanent assignment vs licensing royalties, Rule 28 cross-charge among related entities, and RCM applicability.

GBy GST Munshi Intellectual Property & Indirect Tax Cell•Published: September 2026•Updated: Sep 11, 2026•18 min read•12.9K views•1 reading now

Verified against Official Govt Circulars & Statutes

Quick Answer & Key Takeaways

Quick Answer: GST on Brand Names & Trademarks

Under the Goods and Services Tax framework, intellectual property transactions—whether structured as temporary licensing (royalties, franchise fees) or permanent assignment (full sale of trademark rights)—attract a standardized 18% GST under SAC/HSN 9973. Deemed supplies between group companies or holding-subsidiary entities for brand sharing must be cross-charged under Rule 28. Foreign royalty remittances attract 18% IGST under reverse charge (RCM), which is 100% creditable as ITC.

Uniform 18% GST Rate: Both licensing (temporary rights) and permanent assignment attract 18% GST under SAC 9973.

Schedule I Deemed Supply: Using a group brand name without consideration triggers mandatory Rule 28 valuation and GST.

Import of IP Services (RCM): Foreign trademark royalty remittances require 18% IGST payment via cash ledger under RCM.

Full ITC Admissibility: GST paid on brand licensing is 100% eligible for ITC under Section 16 for business entities.

1. Statutory Classification & HSN 9973 Scope

Intellectual property represents intangible personal property. Under the pre-GST regime, whether IP transfer was a "sale of goods" (liable to VAT) or a "service" (liable to Service Tax) spawned endless litigation.

Under Section 7 read with Schedule II (Paragraph 5(c)) of the CGST Act, 2017: "Temporary transfer or permitting the use or enjoyment of any intellectual property right" is explicitly classified as a Supply of Services under Service Accounting Code (SAC) 9973.

2. Trademark Licensing vs Permanent Assignment

Trademark Licensing (Temporary Use)

The licensor retains proprietary ownership of the registered trademark while conferring limited, revocable, non-exclusive or exclusive commercial rights to the licensee in exchange for recurring royalties or turnover percentages.

Trademark Assignment (Permanent Sale)

The assignor permanently sells and transfers all proprietary rights, goodwill, and title in the trademark to the assignee through an assignment deed registered with the Trade Marks Registry under Section 37/38 of the Trade Marks Act, 1999.

3. Applicable GST Rates & HSN Tariff Slabs

SAC / HSN Code	Nature of Intellectual Property Supply	GST Rate
SAC 997331	Licensing services for the right to use trademarks and franchises	18% (9% CGST + 9% SGST)
SAC 997332	Licensing services for the right to use research, patents, and designs	18%
SAC 997339	Permanent transfer of intellectual property rights (other than software)	18%
HSN 998399	Management and advisory services for brand positioning	18%

5. Reverse Charge Mechanism (RCM) on IP Transfers

Under Notification No. 13/2017-Central Tax (Rate) Entry 5D, supply of services by an author, music composer, photographer, artist, or copyright owner by way of transfer or permitting the use or enjoyment of a copyright to a publisher, music company, or producer is subject to Reverse Charge Mechanism (RCM).

Trademarks vs Copyrights RCM Distinction

Note: Domestic licensing of Trademarks and Brand Names is NOT under domestic RCM (it falls under normal forward charge where the brand owner charges 18% GST). RCM applies exclusively to authors/artists under Entry 5D, or on foreign import of IP services under Section 7(1)(b) / Notification 10/2017-IT(R).

6. Cross-Border Royalties & Import of OIDAR / IP Services

When an Indian business pays brand royalties to an overseas parent (e.g., McDonald's India, Domino's / Jubilant FoodWorks, Hyundai India):

Import of Services: Under Section 2(11) of the IGST Act, the supply of service where the supplier is outside India, the recipient is in India, and the place of supply is in India constitutes an Import of Service.
Mandatory 18% IGST under RCM: The Indian recipient must pay 18% IGST in cash in Table 3.1(d) of GSTR-3B.
100% ITC Recovery: The IGST paid under RCM is fully creditable in Table 4(A)(3) of Form GSTR-3B during the exact same filing period.

7. Head-to-Head: Permanent Transfer vs Temporary License

Parameter	Permanent Trademark Assignment	Temporary Brand Licensing
Legal Nature	Outright sale / transfer of title & goodwill	Permission to use / franchise license
GST Classification	Supply of Service (SAC 997339)	Supply of Service (SAC 997331)
GST Rate	18%	18%
Payment Structure	One-time capital consideration	Recurring periodic royalties (% of sales)
Income Tax Treatment	Section 55 Capital Gains on Intangibles	Section 37 Business Expense / Sec 194J TDS

8. Input Tax Credit (ITC) on Trademark Royalties

GST paid on brand licensing is neither blocked under Section 17(5) nor restricted by general exclusions:

Statutory ITC Conditions (Section 16)

Possession of a tax invoice or debit note issued by the brand licensor.
Invoice details accurately populated in Table 4 of Form GSTR-2B.
Payment of consideration plus GST completed within 180 days from the invoice date.
Used exclusively in the course or furtherance of taxable business supplies.

9. Drafting Royalty Agreements: Essential GST Clauses

Exclusive of Taxes Covenant: Explicitly stipulate that royalty consideration is net of taxes, and GST at 18% shall be payable additionally by the licensee upon invoice generation.

TDS Deduction Alignment: Clarify that Income Tax TDS under Section 194J (2% or 10%) must be deducted on the base value excluding GST, strictly complying with CBDT Circular No. 23/2017.

Cross-Border Equalisation Levy / DTAA: Specify withholding obligations and DTAA beneficial rates without diluting GST RCM liabilities.

10. Major Departmental Audit & Scrutiny Triggers

Recurring GST Notice Ground

Failure to Cross-Charge Corporate Brand: Departmental audit teams issue Section 74 notices calculating deemed brand royalty as 1% to 2% of subsidiary revenues. Group entities must establish an internal cross-charge valuation policy!
Delay in Paying RCM on Foreign Royalties: Under Section 13(3) of the CGST Act, the time of supply for RCM in case of associated enterprises is the date of entry in the books of accounts or date of payment, whichever is earlier. Delayed booking attracts Section 50 interest!

GST on Brand Names & Trademarks: Licensing, Assignment, Valuation & RCM Rules

Quick Answer: GST on Brand Names & Trademarks

1. Statutory Classification & HSN 9973 Scope