Through Notification No. 53/2010 Service Tax CBEC has provided conditional exemption
from service tax to the right to use packaged/canned software. Prior December 21,
2010 Notification No. 2/2010 and 17/2010 was present for similar kind of exemption.
Pasted below depicts the conditions to be fulfilled prior and post December 21,
2010 for availing exemption from Service tax:
Prior December 21, 2010
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Software to be intended for single use and packed accordingly
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The document providing the right to use packaged or canned software, by whatever
name called, if any, is packed along with the software
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(a) In respect of software manufactured in India - The manufacturer, duplicator,
or the person holding the copyright to software has paid the appropriate duties
of excise on the entire amount received from the buyer
(b) In case of software Imported into India - The importer has paid the appropriate
duties of customs on the entire amount paid by him
Post December 21, 2010
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The value of the packaged or canned software domestically produced or imported,
for the purposes of levy of the duty of central excise or the additional duty
of customs, if imported, as the case may be, has been determined under section
4A of the Central Excise Act, 1944
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A declaration made by the service provider on the invoice relating to taxable
service referred in clause (v) of Section 65 (105) of the Finance Act, 1994
that no amount in excess of the retail sale price declared on the packaged or
canned software has been recovered from the customer
-
(a) In respect of software manufactured in India - The manufacturer, duplicator,
or the person holding the copyright to software has paid the appropriate duties
of excise on the entire amount received from the buyer
(b) In case of software Imported into India - The importer has paid the appropriate
duties of customs on the entire amount paid by him
According to the new exemption Notification condition of single use of packaged
software and document providing the right to use to be packed along with the packaged
software are removed. However to avail exemption from service tax post December
21, 2010 following conditions needs to be fulfilled:
o Excise/Custom duty needs to be paid on the value of the packaged software
o Value of the packaged software needs to be determined according to Section
4A of the Central Excise Act, 1944 (MRP based valuation of Goods)
o A Declaration is required on the invoice for the value of packaged software
This new Notification seeks to provide better clarity as far as exemption from service
tax is related withretail sale of packaged or canned software. However
certain questions are still unanswered:
o What will happen if the packaged/canned software is purchased by corporate/institutional
buyers?
o How the exemption is to be availed when packaged/canned software is downloaded
electronically?
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