Service tax on download of software from outside india india
This query is : Resolved
11 January 2016
I have doubt about service tax on Import of software in the form of download from website maintained out side of India.
I have received invoice from supplier in UK containing development and maintenance charges separately.
Whether i have to pay service tax on development or maintenance or both as per RCM?
is there any notification?
I have received invoice from supplier in UK containing development and maintenance charges separately.
Whether i have to pay service tax on development or maintenance or both as per RCM?
is there any notification?
11 January 2016
You are liable for service tax on both as per RCM.
11 January 2016
In case no PE of foreign company in India, then you have to pay service tax under RCM on both development and maintenance charges.
11 January 2016
is there any notification ?
24 July 2025
Yes, there is a clear legal basis and notification for this.
Applicability of Service Tax on Software Downloaded from Outside India (Under Reverse Charge Mechanism):
Rule: When you import services from a foreign service provider who does not have a Permanent Establishment (PE) in India, the recipient of the service in India is liable to pay Service Tax under the Reverse Charge Mechanism (RCM).
This applies to both:
Software development charges, and
Software maintenance charges.
Relevant Notifications and Rules:
Section 68(2) of the Finance Act, 1994: Provides that the service tax on certain notified services received from outside India shall be payable by the recipient under RCM.
Notification No. 30/2012-ST dated 20-06-2012 (as amended): Lists services liable to service tax under RCM, which includes services like software development and maintenance received from outside India.
Rule 2(1)(d) of the Service Tax Rules, 1994: Defines “import of services.”
Circulars issued by CBEC (now CBIC) clarify that:
If the foreign company has no PE in India, the Indian recipient must pay service tax under RCM.
Both development and maintenance fees are taxable.
Summary:
Scenario Service Tax Payable by Remarks
Foreign software company has no PE in India Indian recipient (You) via RCM Service tax applicable on development and maintenance charges.
Foreign company has PE in India Foreign company Foreign company responsible to pay service tax.
Applicability of Service Tax on Software Downloaded from Outside India (Under Reverse Charge Mechanism):
Rule: When you import services from a foreign service provider who does not have a Permanent Establishment (PE) in India, the recipient of the service in India is liable to pay Service Tax under the Reverse Charge Mechanism (RCM).
This applies to both:
Software development charges, and
Software maintenance charges.
Relevant Notifications and Rules:
Section 68(2) of the Finance Act, 1994: Provides that the service tax on certain notified services received from outside India shall be payable by the recipient under RCM.
Notification No. 30/2012-ST dated 20-06-2012 (as amended): Lists services liable to service tax under RCM, which includes services like software development and maintenance received from outside India.
Rule 2(1)(d) of the Service Tax Rules, 1994: Defines “import of services.”
Circulars issued by CBEC (now CBIC) clarify that:
If the foreign company has no PE in India, the Indian recipient must pay service tax under RCM.
Both development and maintenance fees are taxable.
Summary:
Scenario Service Tax Payable by Remarks
Foreign software company has no PE in India Indian recipient (You) via RCM Service tax applicable on development and maintenance charges.
Foreign company has PE in India Foreign company Foreign company responsible to pay service tax.
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