Service Tax on sale of 'readymade' software

This query is : Resolved

Prakash (Querist)
Follow

19 October 2008 I wish to know if an imported 'readymade' application software either in 'digital/non-physical' form or 'boxed' form from USA/UK, when sold in India, does 'Service Tax' need to be charged to the buyers ?

As I understand, 'Tally' is also a readymade application software and buyers of Tally are charged only VAT @ 4% and not Service Tax.

Awaiting expert opinions.

Thanks.

G. Prakash

Reetika Goel

Reetika Goel (Expert)
Follow

22 October 2008 Hello Mr. Prakash,

Service Tax is leviable only if some service is provided to the other person whether they are of mechanical, technical, professional, medical or engineering nature.

As in your case, their is only selling of product which is intangible in nature, the provisions of Service Tax would not attract.

So, if any intangible good whether in digital form or packed in box is transfered VAT would be chargeable/payable.

Prakash

Prakash (Querist)
Follow

24 October 2008 Dear Ms. Reetika,

Thank you for the quick response.

Only thing is that at the time of selling, many times client asks to install the software on their computer and give some guidance to operate. This is done BUT FREE OF COST. There is no extra charge levied for this.

To compare it again with Tally, they send their engineer to install and instruct, but they do not levy any service tax in the invoice.

So, if such facility/service is given to the customer FREE OF COST, is Service Tax leviable ? I hope not.

Awaiting your response.

Thanks.

Prakash

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
Follow

24 July 2025 Great question!

Here’s the summary regarding **service tax on sale of readymade software** in India:

* **Sale of readymade software itself (whether physical boxed version or digital download) is treated as sale of goods, not a service.**
* Therefore, **service tax is NOT applicable on the sale price** of the software. Instead, VAT (or GST now) applies, as software is considered a good.
* If the seller provides **installation and training services free of cost** (no separate charge), then **service tax is NOT applicable on that free service** because there is no consideration for the service.
* However, if installation, customization, or training is charged separately (i.e., consideration is received), then service tax may be applicable on those service charges.

In the example of Tally, they provide installation and guidance **free of cost**, so only VAT/GST is charged on software sale — no service tax.

So, in your case, since installation and guidance are free, **service tax is not leviable** on those activities.

---

**Summary:**

* Software sale = VAT/GST
* Installation/training free of cost = no service tax
* Installation/training charged separately = service tax applicable on service charges

---

If you want, I can also share relevant legal references or updates post-GST era. Would you like that?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now