Tax liability

Queries 1381 views 3 replies

karthik

Student CA Final

43 Points Joined March 2013

Dear Professionals,

I have unclear question, still i need a solution. Hence kindly bear with me and answer / or question me further so that we can end up an appropriate answer.

Question No: 1

My Client is in the business of developing software application for "Gaming" (Internet Games, Mobile games application) that he does as per the specification received from his customer.

Whether the receipts from this activity is liable to tax under Service Tax as Software Development Service, or Sale since my client transfers all rights to the customer, because only the customer can publish it in the market and earn money from the downloads, (no sharing is given by the customer to my client).

Once the application is given to the customer for a consideration (Full Payment), my client can't resell (i.e cannot publish it in the market by himself, neither he can resell to another customer the same application)

Question No:2

Here my client he himself develops new games application software, but as mentioned in above case he didnt sell to any customer for full consideration. Now he himself publish it the public domain, so that users who visit the site can download the application and install in their devices. Income from this activity is not for development of game application software, but for the advertisement posted by the public domain administrater, viewed by the user, who visit the site for downloading the game application software. For every visit of the site, my client will get credit point, end of the month the public domain administrator will pay my client for total visits.

How this attracts tax liability. Whether royalty income or advertisement income

Kindly advise, me whether any ceiling limit is there for him get exemption from Registration from respective taxation authorities.

Replies (3)

karan jit singh

Consultant

1299 Points Joined November 2010

Originally posted by : karthik
	Dear Professionals, I have unclear question, still i need a solution. Hence kindly bear with me and answer / or question me further so that we can end up an appropriate answer. Question No: 1 My Client is in the business of developing software application for "Gaming" (Internet Games, Mobile games application) that he does as per the specification received from his customer. Whether the receipts from this activity is liable to tax under Service Tax as Software Development Service, or Sale since my client transfers all rights to the customer, because only the customer can publish it in the market and earn money from the downloads, (no sharing is given by the customer to my client). Once the application is given to the customer for a consideration (Full Payment), my client can't resell (i.e cannot publish it in the market by himself, neither he can resell to another customer the same application) Question No:2 Here my client he himself develops new games application software, but as mentioned in above case he didnt sell to any customer for full consideration. Now he himself publish it the public domain, so that users who visit the site can download the application and install in their devices. Income from this activity is not for development of game application software, but for the advertisement posted by the public domain administrater, viewed by the user, who visit the site for downloading the game application software. For every visit of the site, my client will get credit point, end of the month the public domain administrator will pay my client for total visits. How this attracts tax liability. Whether royalty income or advertisement income Kindly advise, me whether any ceiling limit is there for him get exemption from Registration from respective taxation authorities.

For Reg :/forum/eligibility-for-vat-and-or-service-tax-281098.asp

Ans 1. No ST should be levied. VAT shall be levied.

Ans 2. In case 2, it attracts the levy of ST as this is a declared service under section 66E(c) as "Temporary transfer or permitting the use or enjoyment of any Intellectual Property Rights.Thus can't said as advertisement service income.

Thanks & regards

Karan