Sale of Imported Readymade Off-the-shelf software

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This query is : Resolved

Prakash (Querist)

31 January 2010 The client has IE Code and wishes to import (from USA) readymade (off-the-shelf) software (this is not custom-made) which they will buy in non-physical form. The same software will be sold to clients in India "without adding any service whatsoever". Do they sill have to collect Service tax on this from the clients here, even though they will be collecting 4% VAT on it. If so, no customer would prefer to pay so much extra when the same software can be purchased directly from USA in 'download' form without attracting service tax, VAT, customs or any other duty. Business of importing readymade software and offering to local clients would make little sense in that case.

Madhukar N Hiregange

Madhukar N Hiregange (Expert)

01 February 2010 As per the decision on TCS case the downloaded s/w is subject to VAT as it is goods. Therefore it should notbe a service.
However under ITSS service, the providing of the right to use IT s/w electronically is a liable. Under reverse charge basis the receiver if using for busienss could be liable. This entry maybe challenged in time to come as on the same activity both taxes cannot be allowed.
However as on date the dispute continues. Your reasoning also is valid.

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