Applicability of Service Tax on Import of Software

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

24 May 2010 My client is an ITES and Socftware company,

kindly advise :
1. Applicability of Service Tax on Software Imported through Internet Downloads

2. If Service Tax is appliable , whether is cenvatable

3. In case company is capitalising such software wheteher it will get cenvat credit

4. In case it being sold ( trading ) than service tax is appliacble or not .

Dayal

Dayal (Expert)

28 May 2010 Ans. 1. It is applicable and payable under Online Database Services
You need to seek registration under the said services under rever charge

Ans 2 Yes, since the use is in relation to business and commerce, therefore cenvatable

Ans. 3. Do not capitalize the service tax element, then you can avail the Cenvat credit, if service tax amount is equally capitalized then the same is not available. What is beneficial for you is to utilise it and not to capitlise it into fixed assets as the benefit of depreciation will be available in future while the benefit of CENVAT Credit will be available today itself if you pay your output service tax net off that CENVAT Credit.

Take your CENVAT Credit benefit today and not tommorrow

Information technology services

Actually w.e.f. F.Y. 2008-09 service tax is made applicable on the customized software including the license part of the customized software.Additionally VAT/CST is also applicable on the license part of the customized software. So there is a dual tax in the form of VAT/CST and Service Tax on the license part of the customized software. All Companies including Oracle,microsoft etc are charging both VAT and Service tax on the license part of their software.

“Information Technology Software” Services are brought into Service Tax net with effect from 16 May 2008. The taxable service definition covers service provided to any person, by any other person in relation to information technology software for use in the course, or furtherance, of business or commerce, including

1.Development of information technology software, study, analysis, design and programming of information technology software;

2.Acquiring the right to use information technology software for commercial exploitation including right to reproduce, distribute and sell information technology software;

3.Acquiring the right to use information technology software supplied electronically;

Therefore both Service Tax and VAT is payable on sale

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