No Service Tax Liability on Franchisor for Advertisement Charges borne by Franchisees: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that franchisors are not liable for service tax on advertisement charges paid by franchisees. The case addressed whether the franchisor should bear service tax liability for promotional expenses covered by individual franchisees. The tribunal's decision clarified that such expenses, when borne by franchisees, do not constitute a service provided by the franchisor. This ruling is significant for businesses operating under franchise models, as it delineates the tax responsibilities between franchisors and franchisees. By ruling out service tax liability for the franchisor in these circumstances, the CESTAT provides clarity on the financial obligations associated with franchise agreements and advertising expenditures.