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Double Tax on Software Licence

jitesh (Excise officer) (83 Points)

21 October 2010

I have received bill from our vendor who deals in software license. In that bill he was charge Vat as well as service tax on whole amount. It's seem to double taxation.

So Plz solve my query

Thanks in advance.

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8 Replies

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 21 October 2010

It is double taxation due to the fact that the software industry has not opposed the same. It is making representatyion while complying. other industries make representation while not paying.

Thereofre the anamoly may never be clarified by the govt as it is receving the monies anyway.

TCS case claearly holds that VAT shouldbe paid. Consequenlty in my view ST should notbe paid.

However if the reciver can avail the credit or pass the same onto his cusotmers then there is no cost impact.

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SANJAY THAKOR (MANAGER-FINANCE) (68 Points)
Replied 23 October 2010

It is not a double taxation, as the software is treated as a goods as per the sale of goods Act. Thus VAT is applicable on sale of software.

Further IT company renders the Services while installation of software and thus service tax is applicable.

Further if your company is in a state (assumed in Maharashtra) where Octroi is applicable and if you brought the goods from out side of the municipality limits then Octroi will also applicable @ 5.5% on software. Even if you down load the software from INTERNET it is subject to Octroi. Pls refer the case law of TCS Ltd.

Thanks.

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 24 October 2010

Please see the bills of the vendors

They charge 4% on the s/w as VAT and 10.3% on the gross amount as ST. Therefore it is case of double taxation. The only way in which it can be justified is as per the aspects theory.

However we have the SC in Imageic creative setting donw that VAT and ST are lutually exclusive.

MOORTHY.R. (ACCOUNTANT) (21 Points)
Replied 02 May 2011

We are IT Hardware/software trading company and facing the double tax problem and on the base value service tax calculted and after adding service tax the vat calculated. The same methiod we biled to customer and the customers refused to pay the service tax amount and we are suffering to clarify the customer either with Section or Act or any case law. And the oustanding of that amount is more than 6 months. As per service tax the amount collected and we need to pay service tax for that bill even though we can not able to collect the service tax amount from the customer.

If there is any solution available kindly let me know to my email id.

Thanks and regards

R. Moorthy

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 02 May 2011

Originally posted by : MOORTHY.R.
	We are IT Hardware/software trading company and facing the double tax problem and on the base value service tax calculted and after adding service tax the vat calculated. The same methiod we biled to customer and the customers refused to pay the service tax amount and we are suffering to clarify the customer either with Section or Act or any case law. And the oustanding of that amount is more than 6 months. As per service tax the amount collected and we need to pay service tax for that bill even though we can not able to collect the service tax amount from the customer. If there is any solution available kindly let me know to my email id. Thanks and regards R. Moorthy

if your products are "excise paid" and you have documents to establish the same, then you dont have to charge service tax, in absence of excise payment service tax is payable,

Excise / service tax is Central taxes while VAT is state tax, so no issue of VAR vs service tax, both are applicable on this field,

either Excise + VAT

or Service Tax + VAT

but in all cases two taxes are applicable.

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UMESH MAHESHWARI (PRACTICE) (59 Points)
Replied 16 October 2013

Can a software company like Microsoft charge service tax as well as Vat on Paper licence issued to the user for O S Licence.Installation work of O S is done by some other person

Niranjan (CA FINAL) (24 Points)
Replied 08 November 2016

Please mention under which section and under which law, Octroi on software is applicable.

I have read the Octroi Rules, 1965. But they haven't mentioned about the definition of an article. In my opinion, software is not a tangible good.Octroi can be levied on visble/tangible goods So, Octroi will not be applicable on software license.

Suppose, if such software is transferring through online cloud computing, whether octroi will be applicable or not?

Suggest me.