12 August 2016
one of the client where i have come for audit have paid both service tax@ 14.5% and vat @5% on the whole value while purchasing the softwares. Normally they are buying the licenses for using the particular software and on that the seller is charging the service tax and the vat on the whole amount. tell please whether it is correct or not. if not what how should the invoice be. whether on part amount service tax and part amount vat is to be charged by the seller? if it is what is the proportion. or whether only vat or service tax alone is to be charged.
14 August 2016
The taxability of Software has always been a litigative area because of difficulty in its classification as goods or service due to its inherent nature of intangibility, transfer of use, license, etc. Under the present tax laws, Software can be liable to taxed under Service Tax, VAT, Excise Duty, Customs Duty, etc depending on the nature of transaction whether it is sale of ‘goods’ or ‘service’ or ‘both’. The reason for its classification is VAT on sales of goods goes to State Government & Service tax on Service goes to Central Government and both governments being totally exclusive in terms of taxability and revenue sharing. There are many cases in which both VAT and Service tax & Excise Duty are applied due to no clarity from government that leads to cascading effect of taxes i.e. a tax on tax (Double Taxation). - See more at: http://taxguru.in/goods-and-service-tax/taxability-software-present-indirect-tax-laws-proposed-gst-examples-india.html#sthash.tJCODNUf.dpuf
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