Regarding Taxability of Software that is packed, refer to Circular F/354/189/2009 TRU of 4th November.
There is still no clarity on the issue. The circular states that Normally, cost of a software supplied in a media consists of two cost components, namely,-
a. the cost of the actual software, i.e. set of information which is placed on a media; and
b. the cost of the intellectual property right (IPR) relating thereto.
ITSS is charged on 'b' above.
Notification 22/2009-CE dated 07.07. 2009 of Excise and 80/2009 of customs after this budget 2009 granted exemption in duty to that value which represented service of ITSS on the software.
Obviously now this is the value of taxable service and therefore would be deductible under FTS for TDS u/s 195 if you import the software. However, there is no clarity as to what value will be charged for State VAT. The clarity seems to be only for the CENVAT and that too implementation is half hearted at the Customs level for CVD.
The problem comes up for actual user buying the software from shops in retail (say you buy the Microsoft Windows or Norton Antivirus). Who is the person providing you the taxable service of ITSS. Is it Microsoft / Norton or is it the shopkeeper selling you the software in retail. If the software vendor selling you the software is registered under service tax and collecting from you the Service Tax on ITSS, do TDS on the full software price. TDS is only a mode of collecting the tax and if excess TDS has been done for the recepient, then he gets the refund. The CENVAT circular is applicable only when the ITSS service is for commercial exploitation. What happens at retail level is not known.
It will be interesting to note what happens when we buy PC with software bundled in.Is ITSS charged on the sale of the PC? On PC recently purchased with all bundled Windows Vista etc., I do not see any service tax charged by the retailer for the PC atleast.
Vishnu, you should provide an exampleof the transaction for which you need clarification. Which software are you purchasing and from whom. The matter is still not having adequate clarity.