I have received the following clarification from Deputy Commissioner of Service Tax Ahmedabad regarding my query (also provided below) on service tax implications on Industrial Design service as practised by us.
 
Warm regards.
Dinesh Korjan
'76 Batch - NID - PD

................................

OFFICE OF THE COMMISSIONER OF SERVICE TAX, AHMEDABAD
CENTRAL EXCISE BHAVAN, AMBAWADI, AHMEDABAD 380 015


F.No.STC/4-145/H.Q./Tech-Clf/04-05/6247                    Dt:1-Dec-04


To,

MIs. Studio Korjan
15, Sameepam,
Narayan Nagar Rd, Paldi,
Ahmedabad-380007


Gentlemen,

    Sub: Clarification regarding taxability of service m.r.

    Please refer to your letter dtd 26.11.2004 on the captioned subject.

In view of the above, this is to inform you that intellectual property emerges from application of intellect, which may be in the form of an invention, design, process, technology, book goodwill etc. At present IPRs such as patents, copyrights trademarks and designs are covered.

A permanent transfer of intellectual property right does not amount to rendering of service. On such transfer the person selling these rights no longer remains a 'holder of intellectual property right' so as to come under the purview of taxable service. Thus, there would not be any service tax on permanent transfer of IPRs. In your case as you have informed that you are transferring your copyrights of your work to your client permanently. Hence are not covered under service tax liability.


Yours faithfully,


Sd..
Deputy Commissioner (Tech)
Service Tax,
Ahmedabad

.......................................


Commissioner
Service Tax
Ahmedabad



26.November 2004             a41157srvTx


Dear Sir

We are an Industrial Design firm providing design services for the manufacturing industry. Our work involves conceptualising / re-conceptualising products with a view to make them unique.

In the process, the product may acquire many new improvements such as better usability, improved aesthetics, lower costs etc. Our work output is generally eligible for Design Registration and is sometimes Patentable.

Copyrights for our work are transferred to the client, upon completion and receipt of all payments due.

Our concepts are provided in the form of design drawings, renderings (illustrations) and / or physical models. The drawings we provide are without tolerances and are not production drawings. The client usually engages the service of an engineer to productionise the same.

If we are eligible to pay Service Tax, we would like to register ourselves before 30^th November 2004 and take advantage of the special registration scheme period.

But being a relatively new profession, we are unable to classify our services in any of the Taxable services mentioned and hence this request for your advice.

In our view, Intellectual Property Services could be applicable but we come under exemption as there is permanent transfer of IPR generated. This was confirmed with Deputy Commissioner, Service tax, Mr. Dhirendra Lal, during our discussions on 18^th October 2004.

We have read through the service profiles, as provided in your manual, of
Fashion Designer
Interior Decoraton
Consulting Engineers
Scientific & Technical Consultancy
Business Auxiliary Service
and are unable to place ourselves in any of the above categories.

In many ways, Industrial design is to the manufacturing industry what Architecture is to the building industry.

Kindly advise us at the earliest.

Sincerely
for Studio Korjan

Sd..
Dinesh Korjan

-- Studio Korjan
15 Sameepam, NarayanNagar Road
Paldi, Ahmedabad 380 007, India
Tel/Fax: +91-79-2661 3188
studio@... www.korjan.com