Whether Excise Duty OR Service Tax applicable 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.

[YAGAY andSUN]

Transaction	VAT/ CST	Serv Tax	Customs	Excise
e-downloads of software from o/s India	NA	Yes	NA	NA
e-downloads of customised software from o/s India	NA	Yes	NA	NA
Distribution of software in electronic form	Yes	Yes	NA	If replicating, yes
Customization of platform software (eg ERP customization, etc)	Yes	Yes	NA	NA
Software loaded into hardware and offered as solution	Yes	No	Yes	If replicating, yes
Payment of "royalties" on software distributions	No	Yes	No	No
Software as a service	No	Yes	No	No
Cloud Computing	???	???	???	???

AI Summary

Tax treatment of software: service tax generally applies to electronic downloads and SaaS, while distribution may trigger VAT and excise. Questions concern tax liability for home automation software: free mobile apps with no invoicing, and server software plus access licenses sold online or physically. The reply states e-downloads and customised e-downloads attract service tax; electronic distribution implicates VAT/CST and service tax; software loaded into hardware attracts VAT and may trigger customs and excise if replicated; royalties and SaaS are taxable services; cloud computing treatment is undetermined.