Import of readymade software

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 December 2013 Dear Experts,

we are into trading business since 2008. we were importing the readymade software and sold the same into locally alongwith support services. we have not paid the service tax on import of Readymade software.

my query is whether service tax was applicable on Import of readymade software under reverse charge ?

If yes, than since when it was applicable.

Please advise.

Thanks,
Vijay Jain

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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23 December 2013 if u importing the whole software after purchasing it then no servbice tax is payable.

Querist : Anonymous

Querist : Anonymous (Querist)

23 December 2013 Thanks.

Please elaborate in more detail.

Querist : Anonymous

Querist : Anonymous (Querist)

23 December 2013 But under reverse charge, we have to pay service Tax on import of software or not.

Please advise.

Regards,
Vijay Jain

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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28 July 2024 Yes, service tax was applicable on the import of readymade software under the reverse charge mechanism, and here's a detailed explanation of how it works:

### **Applicability of Service Tax on Import of Readymade Software**

#### **Service Tax on Imported Software**

1. **Reverse Charge Mechanism:**
- **Reverse Charge:** Under the reverse charge mechanism, the recipient of the service (in this case, the importer of the software) is required to pay service tax instead of the service provider.
- **Service Tax Liability:** When you import readymade software and sell it locally, you are liable to pay service tax on the import under the reverse charge mechanism.

2. **Legal Framework and Applicability:**
- **Service Tax Rules:** The Service Tax (Amendment) Rules, 2006, introduced the concept of reverse charge for certain services, including the import of services.
- **Notification 17/2009-ST:** The service tax on the import of services was governed by Notification 17/2009-ST, which detailed various services on which the reverse charge mechanism was applicable.

3. **Import of Readymade Software:**
- **Software as a Service:** The import of software, especially when accompanied by support services, fell under the category of "Intellectual Property Service" or "Consulting Engineer Service" in the earlier tax regime, making it subject to reverse charge.

4. **Timeline of Applicability:**
- **Reverse Charge Introduction:** The reverse charge mechanism for the import of services, including software, was introduced in 2006.
- **Specific Applicability:** The exact applicability to readymade software and any specific exclusions or inclusions would be detailed in the notifications and circulars issued by the CBEC (Central Board of Excise and Customs) over time.

#### **Impact and Compliance**

1. **Service Tax Payment:**
- **Payment Requirement:** If service tax was applicable and not paid, you are required to pay the service tax along with interest for the period during which it was due.
- **Penalties:** Non-payment of service tax might attract penalties and interest as per the provisions of the Finance Act, 1994.

2. **Documentation:**
- **Record Keeping:** Maintain all records related to the import of software and the corresponding service tax payments. This will be crucial for compliance and any audits.
- **Payment of Service Tax:** File the service tax returns (ST-3) and ensure that the service tax on the import is correctly reflected and paid.

3. **Future Compliance:**
- **GST Transition:** Note that with the introduction of GST from July 1, 2017, the service tax regime has been replaced by GST. Under GST, the taxation on the import of services, including software, falls under the Integrated Goods and Services Tax (IGST) regime.
- **IGST on Imports:** Under GST, IGST is applicable on the import of goods and services, including readymade software. Ensure compliance with GST provisions if the transaction occurs post-GST implementation.

### **Conclusion**

- **Service Tax on Imported Software:** Yes, service tax was applicable on the import of readymade software under the reverse charge mechanism.
- **Timeline:** The reverse charge mechanism for imported services, including software, was applicable from 2006 onwards.
- **Current Status:** For transactions post-July 1, 2017, GST is applicable, and you should comply with IGST provisions for imports.

If you need to address non-compliance or need specific guidance, consulting a tax professional or legal advisor is advisable to handle past liabilities and ensure future compliance.

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