GST update on Brand registration

GST UPDATE ON BRAND REGISTRATION

Notification no. 2/2017-CT (Rate) dated 28.6.2017 provides exemption to the intra-state supply of goods specified therein. This notification grants exemption to certain goods like barley, maize, rice, natural honey, paneer, wheat, etc. on conditional basis. This exemption is allowed subject to the condition that these are not put up in unit container and bearing a registered brand name. Further, Notification no. 1/2017-CT (Rate) dated 28.6.2017 prescribes the rates of tax (majority of cases covered in 2.5% slab) on certain goods subject to condition that these are put up in unit container and bearing a registered brand name. Explanation to these two notifications provided the definition of registered brand name as follows:-

"(ii) The phrase “registered brand name” means brand name or trade name, that is to say, a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of that person, and which is registered under the Trade Marks Act, 1999."

Therefore, as per this notification, exemption was allowed only to those specified goods which were not carrying any brand name registered under Trade Marks Act, 1999. In the advent of GST regime, people have started deregistering their brand in order to claim exemption from payment of GST.

The 21st GST Council meeting held at Hyderabad on 9th September 2017 had discussed about this issue and it was observed that businesses selling branded food are deregistering their brands to evade tax as unbranded food is not taxed. Thus, the fitment committee proposed to the GST Council to consider May 15, 2017, as the cut-off date for considering a brand as registered for the purpose of levy of GST, irrespective of whether or not the brand is subsequently deregistered.

This agenda of GST council has been implemented vide notification no. 27/2017-Central Tax (rate) and notification no. 28/2017-Central Tax (rate), both dated 22.9.2017. These notifications are being issued to give effect to changes in GST rates on goods and conditions appended thereto. These notifications have been issued to amend the exemption notification no. 1/2017-CT(Rate) and notification no. 2/2017-CT(Rate).

In both of these notifications, wherever the words “bearing a registered brand name” is mentioned, it is being replaced / substituted by the words “bearing a registered brand name OR bearing a brand name on which an actionable claim or enforceable right in a court of law is available. This will exclude those actionable claims or any enforceable right in respect of such brand name has been voluntarily foregone, subject to the conditions as prescribed in Annexure to this Notification.

This annexure prescribes how a person can forego an actionable claim or enforceable right on a brand name which is mentioned as under:

1. A person undertaking packing of goods in unit containers which bear a brand name shall have to file an affidavit to that effect with the jurisdictional Commissioner of Central tax that he is voluntarily foregoing his actionable claim or enforceable right on such brand name;
AND
2. A person undertaking packing of such goods in unit containers which bears a brand name shall, on each such unit containers, clearly print in indelible ink, both in English and the local language, that in respect of the brand name printed on the unit containers he has foregone his actionable claim or enforceable right voluntarily.

If these conditions are satisfied, it will be deemed that the person has foregone his actionable claim or enforceable right voluntarily.

Further, the amendment has been made to change the definition of "brand name". The new definition reads as follows:-

“brand name” means brand name or trade name, that is to say, a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of that person.

Further, the phrase “registered brand name” means,-
(A) A brand registered as on the 15th May 2017 under the Trade Marks Act, 1999, irrespective of whether or not the brand is subsequently deregistered;
(B) A brand registered as on the 15th May2017 under the Copyright Act, 1957(14 of 1957;
(C) A brand registered as on the 15th May2017 under any law for the time being in force in any other country.”

Therefore, in view of above, it is clear that there are substantial changes in case goods are sold under brand name. There is drastic widening in the scope of term "brand name" and procedural formalities have increased in case the actionable claim or enforceable right on a brand name is to be foregone.

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GST update on Brand registration

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