Discussion Topics

« Return to Ask EMERGE!

Exemption of Excise Duty on Packaged Software

Avinash

I did get a query on the above mentioned subject from one of my members:

=======================

We are into PACKAGED SOFTWARE business. Presently, we charge EXCISE DUTY & CST/VAT on the products billed and SERVICE TAX on services rendered (implementation, support etc.). The latter part is usually done by our Channel Partners.

The UNION BUDGET 2009-10 has proposed exemption of Excise Duty on Packaged Software. But, at the same time, it makes a mention of SERVICE TAX applicability which is not clear to us.

The confusion is, whether we have to:

Option 1: Continue as it is
Option 2: Stop charging the EXCISE DUTY on License Fee
Option 3: Stop charging the EXCISE DUTY but start charging the SERVICE TAX on License Fee.

Any guidance in this matter will be appreciated.

===========

I have sent the following information to the members...if companies can share more info...it would be helpful for others:

Excise exemption on packaged software
During Union Budget 2008-09, Service Tax was introduced on specified software transactions including right to use IT software. The new category appeared to cover transactions relating to packaged software as well. This resulted in a multiplicity of taxes, as packaged software is treated as goods liable to Excise duty (CVD in case of imports) and VAT.

To remove this anomaly and with the intention to ensure a consistent approach for taxing packaged software as goods and not as services, industry had sought a Service Tax exemption for packaged software from the Government. During the Union Budget 2009-10, however, the Government has provided for an exemption from Excise duty to packaged software in respect of consideration that is paid / payable for transfer of right to use such software, subject to the satisfaction of specified conditions.

The amendment ensures that packaged software would not be simultaneously subjected to both Excise Duty / CVD and Service Tax, thus providing major relief to importers thereby providing major relief in respect of Federal taxes. However, the issue of domestic transactions being subjected to both VAT and
Service Tax continues.

Thanks.

Avinash

Replies to this Topic

Rajendra V B

Until we see GOI notifications based on this budget, we can not be sure if relief is there to the extent it appears today.

It is a fact that cos in India have been paying VAT as well as Service Tax, to please state govt on VAT and central govt on service tax components. State govt never conceded that sw license sale is service as they treated it as goods only.

It was unfair and continued as largest product vendors never found sufficient reasons to complain and all buyers had to pay this redundent levies.

It will be worth if Nasscom takes the interpretation from big ticket license sellers like Microsoft India, SAP India, Oracle India, IBM India etc. They may find it convenient to charge whatever is safer for dealing with tax authorities while Indian buyers had been suffering. Can we at least now, using this open platform get to know what these big brothers charge and pay.

Nasscom initiative to spread awareness will be highly valuable.

 

Rajendra V B

I do await Nasscom advice on excise duty/ CVD, service tax etc as applicable to sw products license selling, software solution selling, IT System selling ( HW Plus SW Plus service man days).......

No one else can do better authentic guidence than Nasscom. With tons of contacts and frequent joint work with KPMG, Delloit, ( let us exclude PWC) etc, why not get it circulated.

Looking forward to ...

Post Reply

You must be a member of this Groupsite in order to post a reply to this topic.
Click here to join this group.