Franchise service is not transfer of right to use goods :
In Malabar Gold v. CTO (2013) 40 STT 319 = 35 569 = 63 VST 497 (Ker HC DB), it was held that franchise service is not subject to State Vat. It is not transfer of right to use trade mark [reversing decision inMalabar Gold v. CTO (2013) 38 STT 606 = 30 taxmann.com 606 = 58 VST 191 (Ker HC),
where it was held that Vat is payable on franchisee services, even if service tax was paid].
There are some contrary decisions also.
Royalty received from franchisee for use of trade mark is liable to sales tax – Jojo Frozen Foods v. State of Kerala (2009) 24 VST 327 (Ker HC DB) – followed by same bench in Kreem Foods v. State of Kerala (2009) 24 VST 333 (Ker HC DB) – same view in Vitan Departmental Stores v. State of Tamil Nadu (2014) 45 GST 95 = 44 taxmann.com 433 = 68 VST 70 (Mad HC DB).
In Vitan Departmental Stores v. State of Tamil Nadu (2014) 45 GST 95 = 44 433 = 68 VST 70 (Mad HC DB), the dealer had transferred licensed right of its name, marks, systems, symbols etc. on exclusive basis to operate supermarket in a particular area. It was held that since incorporal rights have been exclusively transferred, sales tax is payable on agency commission.
[Really, in case of franchise, the trade mark is not ‘transferred’ to franchisee. He is only allowed to use the trade mark. Hence, in my view, this cannot be ‘transfer of right to use goods’ and hence cannot be ‘deemed sale’]