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service-tax-software-custom-vat

16.12.2011

Below is personal view of our senior manager Mr.Kunjan Shah for help of general public.

Service tax-vat-custom duty on software in India – heavily debated topic, but I try to give my view below. (I am not responsible for action on below as its only for general help of public & I invite other professional’s view on this)

If the software in which you deal is a type of packaged or canned software:-

·        Only  vat  is payable by you and no service tax. (as per circular no. 53 of 2011). 

 

·        Custom duty v/s. service tax for canned / packaged software

Apparently, I feel if you wish to take advantage of exemption under service tax under notification no. 53 of 2010, you ought to have paid custom duty and if  you wish to take advantage of exemption under customs act under notification 25 of 2011 (emailed to you on 4.11.2011, but enclosed herewith again), you have to be paying corresponding service tax on same. In short, it seems difficult to obtain exemption from both, service tax and customs. Also, service tax exemption is apparently available only if retail price is stated on the product. Please refer enclosed notification no. 53 for service tax.

 

What if software is downloaded electronically?

Even today, less clarity is available on service tax for packaged software downloaded electronically. But, in my humble view,  (though there is no official circular to this effect yet), ‘electronically’ is a mode of distribution and is continues to be packaged software. Hence, even electronically downloadable software is eligible to avail service tax exemption under notification no. 53 of 2010

 

What is packaged/canned software?

Under customs notification, packaged software is defined as one which can be sold off the shelf. I feel your kind of software could be termed as packaged software, but you know best as I am not aware exactly what software it may be in your case.

Why vat on software? –

·        In view of Supreme court judgement in case of TCS, software is considered as ‘goods’.

 

What If your software is not packaged or canned software

·        Here, service tax and vat both are leviable, (unless you can factually birfucate services and goods part separately, which is could be difficult to justify).

 

Applicable clause of Service tax :-

·        Services of software falls under  clause of “Information Technology Software 65 (105)(zzze).

 

Renewal / AMC on software  Clearly, service tax and no vat will  be levied in this case.

Rate of vat and service tax -  Currently, service tax as you are aware is 10.3%. The Maharashtra vat rate on software is 5%. CST rate (inter state sale) if a dealer sells from its Mumbai office, would be 2% against C form and 5% without C form supplied by customer.

Regards, Mr.Kunjan Shah, www.CAnaresh.com , kunjan@canaresh.com  

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CA Kunjan Shah,
16 Dec 2011, 08:51
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CA Kunjan Shah,
16 Dec 2011, 08:52
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