Taxes for newly formed software company

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Querist : Anonymous

Querist : Anonymous (Querist)

15 November 2013 Dear members
A newly formed pvt. ltd. company which exports software. Company isn't started it's business yet.
Kindly suggest me which taxes are required to register for this company.
Service Tax , VAT or any other taxes for export of software.
Can service tax registration is made before commencing business?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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15 November 2013 yes. service tax registration can be applied for before commencing business.

you also need to apply for export import code.

Also apply for TAN.

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Querist : Anonymous

Querist : Anonymous (Querist)

15 November 2013 Thanks for reply.
kindly tell me is excise registration is also required?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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15 November 2013 excise is for manufacturing concerns. you are in service sector

Querist : Anonymous

Querist : Anonymous (Querist)

15 November 2013 Company deals in software designing & selling them to foreign companies. Is it manufacturing?

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)
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26 July 2025 Great question! Let’s clarify your tax obligations as a **newly formed software company (Pvt. Ltd.)** in India, especially one **exporting software services**.

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### ✅ 1. **Is Software Development "Manufacturing"?**

No. In general:

* **Software development, designing, and selling (especially customized software)** is treated as a **service**, not manufacturing.
* Hence, **Excise registration is NOT required**.

> 🔹 *Excise duty applies to manufacturing of goods.* Software, unless sold on a **physical medium (CDs/DVDs)** as *packaged software*, is treated as a service.

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### ✅ 2. **Relevant Taxes & Registrations (As of 2013-2016)**

(Note: Pre-GST regime – based on your question date)

| Registration / Tax | Required? | Comments |
| ---------------------------- | --------------------------------------- | ------------------------------------------------------------------------ |
| **Service Tax** | ✅ Yes | Apply under “Information Technology Software Services” (Taxable service) |
| **VAT / CST** | ⚠️ Maybe (if selling packaged software) | If you sell off-the-shelf software, VAT/CST may apply |
| **TAN** (Tax Deduction) | ✅ Yes | Required if you deduct TDS from payments (employees, contractors, etc.) |
| **PAN** (Company) | ✅ Must-have | Mandatory for filing and statutory purposes |
| **IEC (Import Export Code)** | ✅ Yes | Required for exporting services/products |
| **STPI Registration** | ⚠️ Optional | Optional, but helpful for software exporters to claim tax exemptions |

> 🔹 **Software exports are exempt from service tax**, but **registration is still required** if turnover is likely to cross ₹9 lakh (now obsolete due to GST).

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### ✅ 3. **Can You Apply for Service Tax Registration Before Business Starts?**

Yes, you **can and should** apply for service tax registration **before commencing business**, especially if you:

* Intend to export services (to claim input credit/refunds).
* Will reach the basic exemption limit.

> Note: After GST implementation in 2017, this is now replaced by **GST registration**, but at your question's date, **Service Tax** was applicable.

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### ✅ 4. **Other Compliance for Software Exporters**

* File **ST-3 Returns** (Service Tax return).
* Claim **input credit** and **refund of service tax paid** on input services used for exports under **Rule 5 of CENVAT Credit Rules**.
* Maintain proper documentation (invoices, agreements with foreign clients, FIRC from banks, etc.).

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### 📌 Summary:

* **Excise Registration** – ❌ Not needed.
* **Service Tax Registration** – ✅ Needed (even before revenue starts).
* **IEC Code** – ✅ Mandatory for exports.
* **TAN** – ✅ Required if deducting TDS.
* **VAT** – ⚠️ Only if you sell packaged software domestically.

Let me know if your query is under **GST regime (post July 2017)** — the rules have since changed.

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