Service Tax on Software

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director
31 Points Joined March 2010

Hello,

We are a SW product development company. Our income can be classified in to (i) from license selling and (ii) from services (AMC, customer visit etc).

Our turnover was more than 10 lcs earlier, so we had registered with service tax dept. But in the last two years, our turnover is less than 8 lacs.

We were not aware of the service tax applicability for software products and we were not collecting service tax on this. We have been paying service tax on the service income (not on the software license selling).

Now do we have to pay service tax on the SW sales of the previous period (considering that our total turnover was less than 8 lacs)? Yes, we have been paying service tax on the service income. (Summary - Though our turnover was less than 8 lacs, we are registered with Service tax dept and we were paying tax on part of the income).

What is the best way out from here onwards?

Valuable guidance sought. Thanks in advance

Regards,
Bala

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On 25 March 2010 at 14:42 Report
Replies (8)
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Chartered Accountant
419 Points Joined November 2008

Dear Bala,

                           your query is complicated query there is a lot of confusion for taking service tax on software. Please write me detail with name of your company and address. my emial id is sachinagarwalcallb @ gmail.com

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On 25 March 2010 at 14:45
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Chartered Accountant
6971 Points Joined September 2007

i think you have to collect service tax on software if you are providing software service to a unique company and you have to collect VAT on canned software like tally, windows xp etc.. if you are coustomising software for a single company then you have to collect service tax.

1 Reply
On 25 March 2010 at 15:03
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director
31 Points Joined March 2010

Thanks Praveen.

 

Our Software product is like Tally, it is a bundled package. We got confused as someone told us that service tax is applicable now on all types of SW.

 

Regards,

Bala

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On 25 March 2010 at 16:33
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Chartered Accountant
6971 Points Joined September 2007

Dear Bala,

 

Please go through this circular, there is exemption in service tax for canned software.

Date:

27-02-2010
Notification No:

Service Tax Notification No 02/2010 (ST)
Issuing Authority: Service Tax  
Type: Notification
File No: 334/1/2010-TRU
Subject:

Exemption to packaged or canned software, intended for single use and packed

Government of India
Ministry of Finance
Department of Revenue

New Delhi, the 27th February, 2010

Notification No. 02/2010 - Service Tax

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service as referred to under item (v) of clause (zzzze) of sub-section 105 of section 65 of the said Finance Act, for packaged or canned software, intended for single use and packed accordingly, from the whole of service tax, subject to the following conditions, namely:-

  1.  the document providing the right to use such software, by whatever name called, if any, is packed along with the software;
  2.  the manufacturer, duplicator, or the person holding the copyright to software has paid the appropriate duties of excise on the entire amount received from the buyer; and
  3.  the benefit under notification No. 17/2010– Central Excise, dated the 27th February ,2010 is not availed of by the manufacturer, duplicator or the person holding the copyright to software.

[F. No. 334/1/2010-TRU]
(Prashant Kumar)
Under Secretary to the Government of India
regards,

     

 

 
1 Reply
On 25 March 2010 at 17:06
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SERVICE TAX CONSULTANT
666 Points Joined August 2009
Originally posted by : Sachin

Dear Bala,

                           your query is complicated query there is a lot of confusion for taking service tax on software. Please write me detail with name of your company and address. my emial id is sachinagarwalcallb @ gmail.com

 Mr Sachin,

YOU ARE ASKING TO WRITE YOU IN YOUR e-mail IN DIFFERENT REPLY.

WHY YOUR ARE DOING SO IS UNKNOWN TO ME.

IF YOU HAVE ANYTHING TO REPLY, WHY NOT USE THIS FORUM..

YOUR VALUED ADVICE WILL TEACH US ALL

THANKS

,

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On 25 March 2010 at 17:22
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director
31 Points Joined March 2010

Thanks again Praveen.

 

In our case, since our turnover is low, we are not paying excise duty. So, I assume there is no complication because of this.

 

Another question, does this mean that a big company developing customized software pays excise duty, service tax and vat?

 

Best regards,

Bala

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On 25 March 2010 at 18:33
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Chartered Accountant
6971 Points Joined September 2007

yep you are right.. but see canned software gets into VAT and ED. that to ED when it crosses 100Lakhs. Service tax on non canned softwares.

but in karnataka there are several sops for software companies.. I am afraid i dont have any idea on what benefits they are getting.

1 Reply
On 25 March 2010 at 19:27
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director
31 Points Joined March 2010

Thanks Praveen. I think the ED exemption limit now is 150 lacs.

 

Best regards,

Bala

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On 25 March 2010 at 21:20


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