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Business, Compliance

You let your Indian company use your IP for free. GST doesn't see it as free

No licence fee changes hands, so it feels like nothing GST would care about. A related-party rule says otherwise, and the relief that can bring the real bill to zero only works if your company actually qualifies for it.

You personally own a brand, some code, or know-how you built before, or alongside, incorporating your Indian company, and you simply let the company use it, no licence fee, no formal charge. It feels informal enough to sit outside tax questions entirely, nothing is being paid, so what would there be to report. GST doesn't see "no consideration" as "no supply" here. A specific rule reaches exactly this arrangement, and whether it actually costs you anything depends on a condition most founders never check.
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Last reviewed: 5 September 20265 min readReviewed by Preetesh Maloo, CA

The short answer

Letting your Indian company use IP you personally own, without charging a licence fee, doesn't put it outside GST. Entry 4 of Schedule I to the CGST Act deems an import of services from a related person, which you are, as the founder who controls the company, a taxable supply even without any consideration changing hands. The company has to account for GST under reverse charge on the deemed value. The real bill often comes to nothing: where the company is eligible for full input tax credit, a 2024 CBIC circular allows the value to be treated as Nil, so what the company self-charges and claims back as credit cancels out. That relief depends on the company genuinely being fully ITC-eligible, not partly making exempt supplies or holding blocked credits, so it's worth confirming rather than assuming.

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Related situations

"No consideration" doesn't take it outside GST here

GST's general rule is that a supply needs consideration to be taxable. Schedule I is the list of specific exceptions, and Entry 4 is built for exactly this pattern: an import of services from a related person outside India, in the course of business, counts as a supply even when nothing is charged for it. A founder who controls the Indian company counts as a related person to it, the same way a group's foreign parent would. Whether the arrangement was ever written down as a formal licence makes no difference to whether the rule applies.

The relief that can zero the bill, and what it actually depends on

The company still has to account for GST under reverse charge on the deemed supply, valued at what an unrelated party would have charged. Here's the relief: where the Indian company is eligible for full input tax credit, a 2024 CBIC circular allows that value to be treated as Nil. In practice, the company self-charges GST and claims the identical amount back as credit, a wash, no real cash outflow.

The condition is the part that gets skipped. "Fully ITC-eligible" isn't automatic, it depends on the company not making exempt supplies alongside its taxable ones, and not holding blocked credits under Section 17(5). A company that assumes the relief applies without actually checking its own credit position is assuming, not verifying.

What goes wrong without a CA

The recurring pattern: the founder treats the free-use arrangement as informal and invisible, because no money moves, so nobody checks whether the company is genuinely fully ITC-eligible or files anything under reverse charge. If the company turns out not to be fully ITC-eligible, perhaps it has some exempt revenue nobody flagged as relevant to this question, the deemed supply carries a real GST liability on notional value, discovered only at an audit, well after the relief that might have zeroed it out was ever actually checked for.

What's involved

What the CA actually does

  1. 1

    We confirm whether your company is actually fully ITC-eligible

    We check the company's actual supply mix and credit position, rather than assume the Nil-valuation relief applies, so you know upfront whether this arrangement is genuinely cost-free or carries a real GST bill.

  2. 2

    We get the reverse-charge accounting done correctly

    Where GST is owed on the deemed supply, we handle the valuation and the reverse-charge accounting properly, so the arrangement is compliant rather than simply unreported.

  3. 3

    We paper the arrangement so it holds up

    We help formalise the IP arrangement with the documentation an audit would actually want to see, whether or not real GST is ultimately due on it.

What to have ready

Documents you'll typically need

  • A description of the IP and how the company actually uses it
  • The company's GST returns, to establish its actual input-tax-credit position
  • Any informal understanding or correspondence about the IP arrangement
  • The company's revenue mix, to check for any exempt-supply component

References on this page

  • Entry 4, Schedule I, CGST Act 2017: import of services by a person from a related person located outside India, in the course or furtherance of business, is treated as a supply even when made without consideration
  • 'Related person', for this purpose, includes a founder who directly or indirectly controls the Indian company, not only a corporate group affiliate
  • Rule 28, CGST Rules 2017, read with CBIC Circular 210/4/2024-GST (26 June 2024): where the Indian recipient is eligible for full input tax credit, the value of the imported service can be treated as Nil, so no real GST cash outflow results
  • Where the Indian company is NOT fully ITC-eligible (partly exempt supplies, blocked credits under Section 17(5), or similar), the deemed supply is valued at open market value and a real GST liability arises under reverse charge

Frequently asked questions

Common questions

Because Schedule I of the CGST Act specifically deems an import of services from a related person a taxable supply even without consideration. As the founder who controls the company, you count as related to it, so the absence of a fee doesn't take the arrangement outside GST.

It depends on whether your company is fully eligible for input tax credit. If it is, a 2024 CBIC circular lets the value be treated as Nil, so the GST it self-charges and claims back cancel out. If the company isn't fully ITC-eligible, real GST liability arises on the deemed value.

Typically, making some exempt supplies alongside taxable ones, or holding credits blocked under Section 17(5). If any part of the company's business isn't fully taxable, its credit position needs checking before assuming the Nil-valuation relief applies.

Not for whether the GST rule applies, Schedule I catches the arrangement regardless of whether it was ever formalised. It matters for how defensible the position is if it's ever reviewed, so documenting it properly is worth doing either way.

Related

If this matched your situation, these go further

You built the product before the company existed. Does the company actually own it?You pay your own overseas company a fee. That's a transfer-pricing filingSetting up an Indian private limited company as an NRI founderYour company paid a foreign lawyer or consultant. GST didn't disappear, it just moved to you

Does your company use IP you personally own, without a formal licence fee?

Tell us what the arrangement actually looks like. A practising CA will check your company's real input-tax-credit position, confirm whether GST is genuinely owed, and get the paperwork right either way, on a free call, no obligation.

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