Excise Duty / Service Tax on Software

[Pranav J]

We manufacture Home Automation Products. Depending on sophistication we offer two solutions.

 

CASE - I  :

 

Broadly this automation solution consists of Hardware and App (working on smart devices). This solution is suitable for single room.

We will be charging Excise Duty on the Hardware Products, however, Apps are made available FREE OF COST on

Apple, Android and Windows App stores.

 

Since the Apps are given to the user Free of Cost, there is no financial transaction taking place. Hence we will not be making invoice either..

 

Query-  not making invoice and not charging excise duty or service tax is legally correct from Excise and Service Tax point of view ?

 

CASE II :

Broadly this automation solution consists of Hardware, App (working on smart devices), software and access license.
This solution is suitable for entire house.

 

When user needs inter-connectivity of controls (say controlling lights of living room from bedroom) Automation Server is required. User can use his PC as a server. Our software will run on this server.

We will be selling the software use license for the Server and also access license to restrict the number of users.

 

Query :

 

i. Is our software Packaged, Canned or Custom Made ?

 

ii. What is the Excise Classification for the same ?

 

iii. What is the Classification for the Access License ?

 

iv. Whether we have to charge Excise Duty OR Service Tax, if both Software and License Keys are made available online.

 

v.  Whether we have to charge Excise Duty OR Service Tax, if both Software and License Keys are made available through 

    Distributor in Physical Form.

AI Summary

Home Automation Firm Questions Tax Obligations for Hardware with Free Apps and Software Licensing Solutions Under Excise Duty Rules. A company manufacturing home automation products seeks advice on excise duty and service tax obligations for two solutions. In Case I, they offer hardware with free apps, questioning if not invoicing or charging taxes is legally correct. In Case II, involving hardware, software, and access licenses, they inquire about software classification, excise duty, and service tax applicability for online and physical distribution. The response suggests that the software's value is included in the hardware, thus excise duty is already paid, addressing their concerns.