Need for Invention in the Taxation Regime of Patents

Agrawal, Anjali ; Singhal, Shiv ; M, Sakthivel

Abstract

The patent system was introduced with the motto of ensuring the furtherance of science and technology for the benefit of society. When compared with other Intellectual Property (IP), the patent has a different dimension that is of technology transfer, and the same has been playing a vital role in domestic and international trade and commerce. Every event of commercialising patent attracts economic returns to the patentee as well as the country where it is registered, retained and commercialised. Thus, merely having inventor friendly ecosystem without foreseeing to retain the registered patents in India for commercialisation to the fullest extent will not favour the developmental goals of the nation. In this context, the paper examines the Indian Taxation regime for the taxing events of patents, both under direct and indirect taxes, and their conduciveness for the effective promotion of creation, retention and commercialisation of IP in India. This paper also compares the taxation of patents in other jurisdictions with India and recommends a favourable tax regime for patents which would incentivise innovation and consequent commercialisation leading to the advancement of the nation.

Keyword(s)

Patent; Economic Rights; Commercial Exploitation; Taxation; Royalty; Income; Income Tax; GST; Patent Box

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