11 February 2010
Our Co. Purchase a software of Rs. 200000/- for Inventory Management & updagrate it for 1 year & pay Rs. 18000/- in same month Party Raised bill as follows:
Software (Ver.XXX) : 200000 Software Update for : 18000 1 Year
11 February 2010
In my Opinion, In the given case, the contact is divisible and separate amount is given for the purchase of software and the service provided for its upgradation. Based on this, Purchase of Software should be charged to sales tax and services provided are liable for Service Tax.
In No way, the total amount is charged with both service tax and VAT. Reference can be taken from the case law, in which it is stated that Service Tax and VAT are mutually exclusive i.e both can not be levied together.
Payments of service tax as also the VAT are mutually exclusive. Therefore, they should be held to be applicable having regard to the respective parameters of service tax and the sales tax as envisaged in a composite contract as contradistinguished from an indivisible contract. It may consist of different elements providing for attracting different nature of levy. It was, therefore, difficult to hold that in a case of instant nature, sales tax would be payable on the value of the entire contract, irrespective of the element of service provided. The approach of the assessing authority, thus, appeared to be correct. [Para 28]
Link for the case law > http://www.taxguru.in/mvat/payments-of-service-tax-as-also-vat-are-mutually-exclusive.html
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