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Service tax on Domestic Software service

Ajith (Accounts) (31 Points)

24 December 2007

hi there

its regarding application of service tax under following scenario

Software Implementation and maintanance
software example : SAP, Microsoft CRM

Does the above deal attracts service Tax ?

If so under which category and why

Thanks:)

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9 Replies

CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. ) (9017 Points)
Replied 24 December 2007

Hi Ajith I Think this clarification from govt of india will be helpful for you

CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. ) (9017 Points)
Replied 24 December 2007

F.NO.354/132/2005-TRU Government of India Ministry of Finance Department of Revenue Tax Research Unit Sub: Leviability of service tax on maintenance or repair of software. Board has examined the leviability of service tax on maintenance or repair or servicing of software under section 65(105)(zzg) read with section 65 (64) of the Finance Act , 1994. 2. Supreme Court in the case of Tata Consultancy Services vs State of Andhra Pradesh (Civil Appeal no 2582 0f 1998) has observed that all the tests required to satisfy the definition of goods are possible in the case of software and in computer software the intellectual property has been incorporated on media for the purpose of transfer and software and media cannot be split up. Therefore, sale of computer software falls within the scope of sale of goods. Supreme Court has also observed that they are in agreement with the view that there is no distinction between branded and unbranded software. 3. Branded software, also known as canned software, sold off the shelf, is transferred in a media and is sold as such and the Supreme Court has decided that such branded software falls within the definition of goods. In the case of unbranded / customized software, the supplier develops the software and thereafter transfers the software so developed in a media and it is taken to the customer’s premises for loading in their system. Thus, in the case of unbranded / customized software also, the intellectual property namely software is incorporated in a media for use. Supreme Court has held that software in a media is goods. 4. Any service provided to a customer by any person in relation to maintenance or repair is leviable to service tax under section 65(105) (zzg) of the Finance act , 1994. “Maintenance or repair” is defined under section 65(64) of the said Act. Accordingly, “maintenance or repair” means any service provided in relation to maintenance or repair or servicing of any goods or equipment. 5 Software, being goods, any service in relation to maintenance or repair or servicing of software is leviable to service tax under section 65(105)(zzg) read with section 65 (64) of the Finance Act, 1994. 6 These instructions are issued taking into account the said decision of the Supreme Court , and in supersession of all earlier clarifications / circulars issued on the above subject. 7. Field formations may be suitably informed. 8. Trade notice may be issued for information of the trade. 9. The receipt of this circular may kindly be acknowledged. 10. Hindi version will follow. F.NO.354/132/2005-TRU R.Sriram Deputy Secretary to the Govt of India

Ajith (Accounts) (31 Points)
Replied 27 December 2007

thank you very much Amit

CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. ) (9017 Points)
Replied 18 January 2008

iits ok

(Guest)

Dear Amit,

We are a manufactrurer ship repairer withy Factory License because under the Factories Act, ship repair is a manufacturing activity. We also are registered with Central Excise as manufacturer.

Now we receiced a demand notice for payment of service tax for repair and maintenance services. In all the over 100 services specified, no 'manufacturer' or business having 'factory license' is taxable. We pay VAT. Thus we cannot pay both servoice tax and VAT on the same income. Are we required to split the invoice ito services bill and manufacturing bill?. We are not shiprepairer withour manufacturing license who will be required to pay the service tax.

What is your view/

Reader

subramanya (Professional) (907 Points)
Replied 20 June 2008

Hi,

There is a separate service category called "Ship Management Services".

Please refer the details taken from a Service tax reckoner. It may help to understand.

Ship management services provided by any person under a contract or an agreement to any other person including supervision of maintenance, survey and repair of ship, engagement or providing crew, arrangements for loading and unloading, receiving hire or freight charges on behalf of owner and dealing with insurance.

Tax Leviable from : 1-5-2006