Softwares are now charged with service tax as well as Value added tax, and lots of confusion appears in field, now is the industry really facing double taxation ?
Let us analyze the facts ,,,,,,,,,,,,,,,,
“Taxable Service” means any service provided or to be provided to any person, by any other person in relation to information technology software, including,-
(i) development of information technology software,
(ii) study, analysis, design and programming of information technology software,
(iii) adaptation, upgradation, enhancement, implementation and other similar services related to information technology software,
(iv) providing advice, consultancy and assistance on matters related to information technology software, including conducting feasibility studies on implementation of a system, specification for a database design, guidance and assistance during the start up phase of a new system, specifications to secure a database, advice on proprietary information technology software,
(v) providing the right to use information technology software for commercial exploitation including right to reproduce, distribute and sell information technology software and right to use software components for the creation of and inclusion in other information technology software products,
(vi) providing the right to use information technology software supplied electronically.
(Section 65 (105) (zzzze) of Finance Act, 1994 as amended)
in the profile itself there is mentioned .................
(3) Packaged software sold off the shelf, being treated as goods, leviable to excise duty @ 8%. In this budget, it has been increased from 8% to 12% vide notification No. 12/2008 C.E., dated 1.3.2008. Number of IT services and IT enabled services (ITeS) are already livable to service tax under various taxable services:
A fair interpretation
- if the software was considered as good then it would attract Excise duty and have to be excise paid
- if the software was considered as service then would attract service tax and have to be ST Paid
Among both the situations above now the IT dealer/ developer has to select the option to pay either Excise duty (cenvat) or Service tax depending on their software criteria. Here we have to note that these two taxes are of "Central Govt" and here no cascading effect or double taxation.
Now come to VAT, which is state affair, where no separate provision is made for service oriented bills, but that field is also taken as "transfer of goods/ rights/services" in VAT explanation, hence VAT is getting charged on softwares on the value of ( software value + excise) or (software value+ service tax).
In a nutshell the dealer has burden to prove that software is either excise paid or service tax paid apart from vat liability.
Now the dealer has to pay any one of
a) excise duty + vat
b) service tax + vat
Understood that if we consider the software as goods then excise is to be considered or if we consider the software as service then service tax is to be considered, but in both cases vat is common.