Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services in India. Revenue sharing agreement is a common practice in business transactions, where two or more parties agree to share the revenue generated from a particular business activity. So, the question arises, is GST applicable on revenue sharing agreements?
According to the GST law, any supply of goods or services made for consideration is liable to GST. In the case of revenue sharing agreements, two or more parties share the revenue generated from a particular business activity. The parties involved in the agreement may provide goods or services to each other, which are taxable under GST.
When goods or services are provided by one party to another in a revenue sharing agreement, GST is applicable on the value of the goods or services provided. For example, if Party A provides software services to Party B, and they share the revenue generated from the services, GST is applicable on the value of the software services provided by Party A.
However, if the revenue sharing agreement is only for the distribution of profits and not for the supply of goods or services, GST is not applicable. For instance, if a partnership firm distributes profits among its partners, there is no supply of goods or services, and hence, GST is not applicable.
It is also important to note that in the case of revenue sharing agreements, the parties involved need to register under GST if their turnover exceeds the threshold limit. They need to issue tax invoices and comply with other GST provisions.
In conclusion, GST is applicable on revenue sharing agreements if there is a supply of goods or services involved. The parties involved need to register under GST if their turnover exceeds the threshold limit and comply with other GST provisions. It is always advisable to consult a tax expert to understand the GST implications on revenue sharing agreements.