Reimbursement Of Foreign Patent Attorney Fees For Overseas Filings Is Taxable Import Of Legal Services, GST Payable: West Bengal AAR
Sangeetha Prathap
The West Bengal Authority for Advance Ruling (AAR) has ruled that reimbursement of fees paid to foreign patent attorneys for filing patents outside India constitutes a taxable import of legal services and attracts Goods and Services Tax (GST) in India under the reverse charge mechanism. The Authority clarified that such reimbursements cannot be excluded from the taxable value merely because the services were rendered abroad or described as reimbursements.
The ruling was delivered by a Bench comprising Shafeeq S., Member (Central Tax), and Jaydip Kumar Chakrabarti, while deciding an application filed by Medtrainai Technologies Private Limited. The dispute arose in relation to patent filings made in Japan, the United States, and the United Kingdom through foreign patent attorneys, facilitated by an Indian intellectual property firm.
The applicant had engaged Seenergi IPR, an Indian intellectual property firm, to coordinate overseas patent filings for an invention relating to smart manikins and augmented reality. The patents were filed in favour of one of the applicant’s directors. Seenergi IPR raised invoices in two parts: Part A, covering reimbursement of foreign patent attorney fees and government charges paid abroad, and Part B, covering its own handling and professional fees. The applicant accepted GST liability on Part B but disputed GST on Part A, contending that the foreign attorney fees were merely reimbursements and outside the scope of GST.
The applicant argued that the patent filing services were consumed outside India, generated no monetary benefit in India, and therefore did not qualify as a “supply” under Section 7 of the Central Goods and Services Tax Act, 2017. It was further contended that Seenergi IPR acted only as a pure agent and that the services should be treated as exempt legal services under Entry 45 of Notification No. 12/2017–Central Tax (Rate). The applicant also submitted that foreign attorney expenses were governed by foreign tax laws and could not be subjected to GST in India.
Rejecting these contentions, the AAR undertook a detailed examination of the statutory framework, including the definition of “supply” under Section 7 of the CGST Act, valuation provisions under Section 15, the pure agent concept under Rule 33 of the CGST Rules, and the place of supply provisions under Section 13 of the Integrated GST Act, 2017. The Authority found that no contractual agreement existed establishing Seenergi IPR as a pure agent of the applicant and that the conditions prescribed under Rule 33 were not satisfied. Consequently, the reimbursement could not be excluded from the taxable value.
The Authority further held that the services were, in substance, legal services rendered by foreign patent attorneys located outside India, with the applicant located in India as the recipient. Applying Section 13(2) of the IGST Act, the AAR ruled that the place of supply of such services would be the location of the recipient, i.e., India. Accordingly, the transaction qualified as an import of services, attracting GST on a reverse charge basis.
Addressing the claim for exemption, the AAR clarified that the exemption under Entry 45 of Notification No. 12/2017 applies only to services provided by “advocates” or “senior advocates” as defined under the Advocates Act, 1961. Foreign patent attorneys practicing in Japan, the US, or the UK do not fall within this statutory definition. As a result, legal services provided by such foreign professionals were held to be taxable and not eligible for exemption.
The Authority also rejected the argument that overseas patent filing was not in the course or furtherance of business, terming it a “dubious” claim. It observed that patent filing is intrinsically linked to protecting intellectual property and is clearly undertaken in the course or furtherance of business. The AAR emphasised that what is relevant is whether the service was supplied in the course of the supplier’s business, which was clearly satisfied in the case of foreign patent attorneys.
Accordingly, the AAR ruled that GST at the rate of 18% is payable by the applicant under the reverse charge mechanism on both Part A (foreign patent attorney fees) and Part B (Seenergi IPR’s handling charges). The ruling applies equally to patent filings undertaken in Japan, the United States, and the United Kingdom.
Name Of The Applicant: Medtrainai Technologies Private Limited
