GST Authority Drops Rs.115 Crore From Tax Demand Against Mahindra & Mahindra

GST Authority Drops Rs.115 Crore From Tax Demand Against Mahindra & Mahindra

The quasi-judicial body, however, upheld a part of the claim in an order that could set a legal precedent in similar cases

The Goods and Services Tax (GST) department has reduced the tax demand on Mahindra & Mahindra for brand name and logo usage by group companies.

The adjudicating authority explained that if the subsidiary paid GST and claimed Input Tax Credit (ITC), the parent company was not liable beyond the declared value. The ITC could be set off against the group company's future tax liability. This meant the government would not benefit.

However, if the group company did not pay any GST, or was not eligible for full ITC, for instance, in the real estate sector, use of the brand name and logo attracted the levy based on industry benchmarking.

On such licensing deals, the authority accepted the GST department's decision to consider 0.25percent of the group company's revenue as the royalty to the parent considering Tata Sons as a benchmark, and levy tax on it.

In August last, the GST authority demanded Rs.147 crore from Mahindra & Mahindra in a show-cause notice.

However, after the company appeal, the GST department dropped Rs.115.82 crore but asked the company to pay Rs.31 crore plus a penalty of Rs.31.35 crore.

Notably, the company was charging all its group firms a nominal fee of Rs.1 lakh a year for using the ‘Mahindra’ brand and logo.

Now, while the GST department has the option to appeal against the authority's order before the Commissioner of Appeals, the company can also approach it against the partial demand and penalty.

Commenting on the rule, a senior government official said that the order would set a precedent across industries, especially for big corporate houses or conglomerates, wherein brand names were used across domestic and worldwide group entities.

In 2024, when the GST department issued a notice to Mahindra & Mahindra, corporate houses raised concerns over the interpretation of the tax liability on brand usage.

The contention was whether GST was applicable on the supply of service for permitting the use or enjoyment of brand name, logo or tagline by group companies without any fee.

Under the GST law, any transaction between parties (made even without consideration), is taxable.

The department argued that the brand name, logo and tagline were the sole properties of Mahindra & Mahindra.