Confusion over entities liable to pay levy on royalty.
Qualcomm India Pvt Ltd (QIPL), the Indian arm of the US-headquartered CDMA patent-holder Qualcomm Inc, has paid over Rs 1 crore as service tax under business auxiliary services.
The payment comes following a notice that was sent to the company's Mumbai office by the Service Tax Department.
According to a service tax official, QIPL has, in its declaration to the department, profiled itself as a "separately-registered independent company" attending only to the customer and marketing-related services of the patent-holding company.
"QIPL began operations only a couple of years ago. We were trying to claim service tax on royalty collected. Now that they are disassociating themselves from Qualcomm Inc, the onus to pay service tax on royalty falls on companies accepting the technology," another official said.
As per rules, the patent holder has to pay a certain percentage of money as service tax on royalties collected. If the patent holder (in the case of a foreign company) has offices/branches in India, the patent holding company has to pay service tax on royalty collected. If the patent holder is a foreign company or foreign national, but with no offices or branches in India, the recipient Indian company (user of the patented product) has to pay service tax on royalty paid.
The department had also approached several Indian telecom companies, including Reliance Infocomm, Tata Teleservices and MTNL, in their capacities as clients of Qualcomm.
"Barring Tata Teleservices, none of them have given us sufficient details to go ahead in our investigation. Tata Tele is said to have remitted a substantial sum of money with Qualcomm for accepting their technology. But another major player has said that they have not paid `any significant sum of money' to Qualcomm," said a senior officer.
Meanwhile the investigation team handling this case has been disbanded and re-allocated to other tasks in the department.
"Investigation into this case will not stop here, we will take serious note of tax evasions," said Mr Satyendra Jeet Singh, Mumbai's Commissioner of Service Tax.