Franchisee Service Tax

Querist : Anonymous (Querist) 06 March 2011 This query is : Resolved
I am a franchisee of Biggest beverage brand in India. Being a franchisee I sell their coffee and tea vending services to all corporate in chennai and Pondicherry. My services includes

1. renting their machines by paying refundable deposit of Rs.25,000/- and monthly rental to franchisor.

2. Buy franchisor products- coffee beans and tea leafs and sell it to all my corporate clients.

3. I purchase the other raw materials from local vendors- i.e milk, sugar, stirrer.

4. I maintain the machine operations by having my own manpower.

My franchisor collects 10% service tax from me. my query is :Am i allowed to collect service tax from my clients ? If yes How do I go about it.

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R.Ramachandran (Expert) 06 March 2011
You are directly selling to your clients. You are not rendering any service to your clients. Therefore the question of your charging any service tax on your clients does not at all arise.

However, since you have been permitted / granted rights by the franchisor for rendering services identified with the 'Franchisor' on his behalf, such permission / grant of rights by the principal (i.e. franchisor) is a service rendered by the Frnachisor to you the Franchisee and therefore the said service is liable to service tax. Therefore, the Franchisor is charging a service tax on you.

Nagaraja B S (Expert) 08 March 2011
Dear User,

Service tax is not applicable. However, i believe you should have registered for VAT??

For more details Contact

Nagaraj
Trademark Attorney & IP Lawyer
IP Lex Global Services
Email: nagaraja_bs@iplexglobal.in

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