Brand Usage in Related Parties: GST Lessons from Mahindra & Mahindra’s ₹146 Cr Notice

Introduction:

When companies in the same group use the same brand name, it might seem like a simple internal arrangement. However, the recent case with Mahindra & Mahindra (M&M) shows us that this can have serious tax consequences under the Goods and Services Tax (GST) law.

M&M received a massive ₹146 crore tax notice because some of its subsidiaries were using its brand but didn’t properly account for the value of the brand when it came to paying taxes. The case raises important questions about how businesses should handle internal transactions involving brand names, especially when it comes to tax deductions.

In this blog, we’ll dive into what happened in this case, why it matters, and how other companies can avoid similar mistakes.

Background of the Case:

Between FY 2017 and FY 2023, several subsidiary companies of Mahindra & Mahindra were using the “Mahindra” brand name and logo without paying a commercial royalty or licensing fee to the parent company. The GST Department contended that this amounted to a supply of service and demanded ₹146 crore in GST, citing non-compliance under valuation and disclosure requirements.

In response, Mahindra & Mahindra began charging a nominal ₹1 lakh per annum from its group companies. However, the department argued this fee was significantly undervalued and did not reflect the “open market value” as required under GST law.

Legal Analysis:

Section 7(1)(c) of the CGST Act, 2017: Defines “supply” to include,
- “…the supply of goods or services or both made without consideration between related persons, when made in the course or furtherance of business.”
Schedule I of the CGST Act:
- Specifies that even without consideration, supplies between related or distinct persons shall be taxable if done in the course of business.
Rule 28 of the CGST Rules, 2017: Provides valuation guidelines for supplies between related parties:
- Value should be the open market value.
- However, if the recipient is eligible for full Input Tax Credit (ITC), the value declared on the invoice will be deemed acceptable, even if it is nominal.
These provisions were the backbone of the GST Department’s argument that the services (trademark usage) had been undervalued, resulting in GST evasion.

GST Authority’s Final Decision:

In April 2025, the GST Authority delivered verdict,

Relief Given:
- For subsidiaries eligible for full ITC, the authority accepted the declared fee of ₹1 lakh as deemed market value under Rule 28, leading to Cancellation of ₹115.82 crore from the ₹146 crore demand.
Tax Confirmed:
- For subsidiaries not eligible for full ITC (such as real estate ventures), the department upheld:
  - ₹31 crore in tax liability, determined using a benchmark royalty rate of 0.25% of turnover, modelled on the Tata Sons precedent.
  - ₹31.35 crore in penalty under the GST penal provisions.

Key Learnings:

Valuation in Related Party Transactions: GST law mandates correct valuation, even for intra-group transactions with nominal or no consideration.
ITC Eligibility Impacts Liability: Where full ITC is available to the recipient, nominal consideration is acceptable under law.
Importance of Brand Licensing Agreements: Proper documentation and consistent royalty mechanisms help avoid litigation.

Implications for Corporate Groups:

This case is important for large business groups where many companies use the same brand name. It reminds us that using a brand—even within the same group—is treated as a service under GST, and a proper value must be assigned to it unless there’s a clear exemption. It wasn’t just about non-payment—it was about incorrect valuation and loss of revenue, which invited the penalty.

Companies must ensure:

Execution of intra-group service agreements.
Valuation aligned with Rule 28 (Explanation in Legal analysis para).
Periodic GST reviews on shared services and intangible asset use.

Conclusion:

The Mahindra & Mahindra case teaches an important lesson: even if a group of companies shares the same brand name, they can’t avoid GST rules. If one company lets another use its brand, there should be a proper agreement in place, and the brand should be given a fair value—especially if the company using the brand can’t fully claim GST credit.

Charging a very small or symbolic amount for brand use can trigger big tax demands and penalties if companies don’t support it with solid business reasoning. Company heads, finance teams, and tax advisors must now double-check how they handle such internal arrangements.

Under GST, being clear and honest in your records is not just good practice—it’s a must. Mahindra’s situation reminds us that even things like brand names, which don’t seem physical, can lead to real tax trouble if not handled properly.

LinkedIn Link : RMPS Profile

This article is only a knowledge-sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event, RMPS & Co. or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update, etc if any.

Please follow and like us: