Customised software and software in manufacture process

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srinivas Ganesh Shet (Querist)
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13 January 2013 namaste all
plealse clarify me
1)service tax applicability on customisation of a software (development,programming)delivered via electronic media or cd or other storage devices.
2) if software development is part of the manufacturing process of the commodity as per work order
and 3) also KARNATAKA VAT Applicability on above cases
4) if service tax and vat applicable in above cases is how will be the invoicing

Kaushik Vinod

Kaushik Vinod (Expert)
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15 January 2013 Dear Srinivas,

The Development and customization of software is taxable service but if the software is sold in hard drive, CD or Pen Drive then this is sale of goods.
It was held in the case of Tata Consultancy Services V/s State of Andhra Pardesh[2002(178)ELT 22(SC)].

Thanks

srinivas Ganesh Shet

srinivas Ganesh Shet (Querist)
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17 January 2013 ok, but developed customised softwares either in the client place or in the business premises should be delivered either by storage devise or via email,
in such cases delivered via email considered as taxable service and delivered by storage devise is considered as sale of goods .please clarify me i did not get this,
and what about VAT applicability if software (customised) delivered through
1) storeage device 2) email 3) along with the other component where in software is part of work order to complete the project

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Kaushik Vinod

Kaushik Vinod (Expert)
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18 January 2013 Dear Srinivas,
Read the following :-
It is a settled position of law that pre-packaged or canned software which is put on a media is in the nature of goods [Supreme Court judgment in case of Tata Consultancy Services v. State of Andhra Pradesh [2002 (178) ELT 22 (SC) refers]. Sale of pre-packaged or canned software is, therefore, in the nature of sale of goods and is not a Service.
Second thing On site development of software is covered under the category of development of information technology software.

Last thing In case contract is given for customized development of software and the customized software so developed is delivered to the client on media like a CD then would the transaction fall in this declared entry or would it be covered by the TCS Judgment?

In such a case although the software is finally delivered in the form of goods, since the contract is essentially for design and development of software it would fall in the declared list entry. Such a transaction would be in the nature of composite transaction involving an element of provision of service, in as much as the contract is for design and development of software and also an element of transfer of title in goods, in as much as the property in CD containing the developed software is transferred to the client. However, the CD remains only a media to transmit or deliver the outcome of which is essentially and pre-dominantly a contract of service. Therefore, such a transaction would not be excluded from the ambit of the definition of 'service' as the transaction does not involve 'only' transfer of title in goods and dominant nature of the transaction is that of provision of service.

I am not familiar with Karnataka VAT provisions so can't say about that.

Thanks

srinivas Ganesh Shet

srinivas Ganesh Shet (Querist)
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18 January 2013 thank you sir