The Hindu : Tamil Nadu / Chennai News : “Software services may attract tax twice”

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Sunday, Jul 20, 2008
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Tamil Nadu

Tamil Nadu - Chennai

“Software services may attract tax twice”

Special Correspondent

CHENNAI: In the run-up to the widely anticipated unified goods and service tax regime that will come into effect from April 1, 2010, a number of issues stemming from service tax amendments announced in this year’s budget are pending clarification. Among them is the question of whether some areas of information technology software services may end up being taxed twice over.

Gautam Bhattacharya, IRS, Commissioner Service Tax, CBEC, Ministry of Finance, on Saturday took questions from members of the Southern India Chamber of Commerce and Industry after inaugurating a seminar on indirect tax.

Despite the understanding that where packaged software is a good and therefore subject to the Value Added Tax, customised software is a service and subject to tax at the Centre. So, double tax issues in licensing and copyright remain, argued V. Sridharan, advocate, Lakshmi Kumaran and Sridharan. In particular, he highlighted the challenges posed by copyright of IP software, licensing software on a time-sharing basis through the Internet, renewal of packaged software licences downloaded electronically, paper licences treated as goods and packaged software imported from abroad and then customised. “The Centre and the State should sort it out. They should not wait for the courts to decide these things over 10 years,” Mr. Sridharan said. He also urged that tangible goods on a time charter should not be subject to tax, because the right of possession and effective control was not transferred.

Mr. Bhattacharya said the law was a two-way process and advised companies, which are nor clear about the service tax amendments, to approach the Finance Ministry through their chambers of commerce. While it was legally permissible to allow both types of taxation on software services, it was not economically sound policy.

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