Monday 24 July 2017

India’s Goods and Services Tax and its Impact on Trademark Rights

One Nation-One Tax: What is GST?

At midnight on June 30, 2017, India was ushered into a new regime of indirect taxation: the GST, or Goods and Services Tax. It is touted as the biggest fiscal reform the country has ever witnessed since Independence, and it has been claimed that it will lead to decreased inflation, rise in GDP, and more transparent accountability of parties. The immediate and noticeable effect is, of course, change in prices. By introducing GST, the government has subsumed Central and State taxes, such as VAT, service tax and Excise Duties, into a unified tax regime applicable across the board in all states and territories. Under the GST, there are now four slabs of applicable tax: a low rate of 5%, standard rate of 12 or 18%, and a high rate of 28%. There are about 1200 goods and 600 services on which GST is applicable, and while there are many items on which the tax is now reduced, thanks to GST, thereby decreasing their final market price, some items have become costlier. The government has claimed that all essential commodities have been exempted from tax under GST, or been left out of the ambit of applicability for GST altogether. The aim is to ultimate reduce the burden laid upon the consumers by the earlier tax infrastructure which resulted in a “cascading tax” effect. The “cascading tax” effect is in essence the principle of the end-consumer having to bear the load of all the taxes paid by dealers, wholesalers, retailers, stockists etc. as middle-men between the source of the goods to their final point of sale.[1]
As it turns out, the implementation of GST may have a profound impact on the Indian intellectual property regime, primarily, trademark rights.

Provisions affecting trademark rights

The GST rate lists for goods and services provide different rates of tax for the branded and unbranded versions of a number of products, essentially common foodstuffs, such as cereals, pulses, paneer and natural honey. These goods, if sold loose, i.e., unbranded and without being packaged in unit containers, will be exempt from GST. However, the moment they are packaged and bear a registered brand name, they will attract GST of 5%.

Notifications 1/2017 and 2/2017 issued by the Central Board for Excise and Customs[2] define a brand name as follows:

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.      
The Press Information Bureau further issued a clarificatory notification on July 5[3] after confusion arose regarding the meaning of “registered brand name” in the GST rate list for goods stating that:
“…unless the brand name or trade name is actually on the Register of Trade Marks and is in force under the Trade Marks Act, 1999, CGST rate of 5% will not be applicable on the supply of such goods.”

While the tax rate of 5% may seem nominal, it is relevant to consider that earlier, food grains, whether packaged or not were exempt from taxes altogether in most States, even though they were allowed to be charged at a rate of 4%. Understandably, this new and compulsory tax imposition has resulted in an outcry among traders in food grains and pulses, staples in any person’s diet.

Impact of GST on Trademark Law

As reported in Livemint[4] on July 7, KRBL Ltd. which owns India’s largest rice brand, ‘India Gate’, is crowing all the way to the bank as its rice now comes exempt from GST, for the simple reason that it has not been able to get its trademark registered with the Indian Trademarks Registry under the relevant class, i.e., Class 30 due to oppositions filed against its marks by third parties. 

In fact, in about the 10 days since GST came into effect, there are already reports of small, local traders resorting to various innovative means to avoid higher rates of taxation on their products.[5] Rice traders have appealed to the Finance Minister to find a solution to their problem, of increased prices, as well as those who are unfair beneficiaries in a competitive marketplace of what appears to be a significant loophole.[6]

The Government has also begun to take note of the problems arising in implementation of the new tax regime and its long-term implications, especially in the area of essential commodities such as foodstuffs and pharmaceuticals.[7] Trademark owners are approaching the Trademark Registry to withdraw their trademarks, or considering inventive ways to keep their marks from attaining registration.[8] If trademark owners would rather surrender trademark protection than pay taxes for them, it could strike a crucial blow to the intellectual property regime in the country.

GST, Trademarks and the Economy: An Impact Analysis

Intellectual Property plays an important part in the growth of any economy and India is well aware of its importance as one of the premier emerging economies in the world. Any fiscal plan that hits intellectual property rights, especially in a deterrent fashion, is likely to impact economic growth and development negatively in the long run. 

A trademark, by its very definition, is an indication of source and a guarantee of quality of goods or services. A fiscal regime that deters traders from using or registering trademarks, simply to avoid tax liability, sets a dangerous precedent. With GST consolidating the national market, the role of trademarks as such becomes even more important. If trademark rights are not enforced properly, it will result in widespread counterfeiting and infringement, indicating an influx of goods of compromised quality. If this is allowed to happen, the reputation and goodwill of established brands will inevitably be diluted and the resultant consumer confusion will diminish the reputation of the market as a whole. This is likely to discourage investment and new start-up enterprises which will negatively impact market indices and thereby, national economic growth. 

GST is likely to impact other forms of intellectual property as well. Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of goods other than Information Technology software (eg. Media streaming services) is being taxed at 12%, while software services, falling under the residual category of services, is liable for 18% tax.[9] Thus, computer software and associated services, at least, are likely to see an increase in prices. 
The new GST tax regime is expected to unify the country’s market, introduce greater transparency, encourage export and investment and reduce inflation. While it is no doubt a revolutionary step to take, unless its implementational drawbacks are dealt with quickly and effectively, its intended boost to the Indian economy might end up backfiring.

Additional References:
The Constitution 101st Amendment Act, 2017.
Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce Production, Supply and Distribution) Act, 2003
Cigarettes and Other Tobacco Products Rules, 2008
Cigarettes and Other Tobacco Products (Packaging and Labelling) Amendment Rules, 2014

[1] See, accessed on July 12, 2017. See also Rate of GST on Goods, Rate of GST on Services, Notifications 1/2017 and 2/2017, dated June 28, 2017, all available at
[2] See Notifications 1/2017 and 2/2017, dated June 28, 2017, both available at
[8] Supra, 5.
[9] See Rate of GST on  Services, supra 1.

India: DIPP establishes its first Innovation Centre in Punjab

On July 13, 2017, The Department of Industrial Policy and Promotion (hereinafter referred to as the ‘DIPP’) signed an agreement[1] with Punjab State Council of Science and Technology to set up its first innovation center, the Technology and Innovation Support Centre (hereinafter referred to as the ‘TISC’) programme under the aegis of the World Intellectual Property Organization (hereinafter referred to as the ‘WIPO’).

About DIPP

The Department of Industrial Policy & Promotion was established in 1995 and re-formed in 2000. Having a progressive liberalization in the Indian economy, there had been a consistent shift in the role and functions of this Department. The role of the Department has been changed into facilitating the investment and technology flows and monitoring its industrial development in the liberalized environment. The Department is responsible for the formulation of promotional and developmental measures for having growth in the industrial sector, by keeping an eye on the priorities and its objectives.

About TISC
The Technology and Innovation Support Centre programme would be established at Punjab Patent Information Centre, under the aegis World Intellectual Property Organization. At present there are 519 TISC services in the world. Around 59 countries have signed a Service Level Agreement (hereinafter referred to as the ‘SLA’) to develop a national TISC network since 2009-2016. Out of which 517 TISCs have been established to provide data to the TISC Directory. It provides a wide range of services like helping the inventors, researchers and entrepreneurs to unlock their potential.
TISC’s programme reduces the knowledge gap and promotes its economic and social development by providing an access to the technology information and services. It has been established in a variety of institutions which includes patent offices, universities, and research centers.

“TISC’s main objective is to stimulate a dynamic and a stable Intellectual Property Rights (IPRs) system in India to increase the creativity and innovation by enhancing social, economic and cultural development”.

(Image Source: WIPO’s Technology and Innovation Support Centers Report 2016)

TISC’s services may include:[2]

  1. Access to both online patent and non-patent resources;
  2. Database search;
  3. Assist in searching and regaining technology information;
  4. On-demand searches like novelty and infringement;
  5. Monitors technology and its competitors;
  6. Information regarding industrial property laws, management, marketing and technology commercialization.
  7. Till date, WIPO had centers in 42 countries around the world but India was not a part of them. With the present agreement, for the first time such a center will come up at the Patent Information Centre (PIC), Punjab. WIPO’s TISC programme helps innovators in developing their countries scientific potential by having an access to nearby countries with high quality technology information, and by helping them to exploit their innovative potential to create, protect, and manage their Intellectual Property Rights (IPRs).  
(Image Source: WIPO’s Technology and Innovation Support Centers Report 2016)
The Cell for IPR Promotion and Management (hereinafter referred to as the ‘CIPAM’) is considered as the National Focal Point for the TISC network which has been approved by the Government in May 2016. CIPAM will act as an intermediator between WIPO and TISC to coordinate all the activities of the network as CIPAM shall identify the potential of the institutions, judge their capacities and support them in joining the TISC programme. The Patent Innovation Center (PIC) has set up with 13 IPR cells in various universities of the state, in addition to the 16 IPR clubs in various engineering colleges and institutes around the country.