Service Tax on Software Keys Distributors

[Akash Shinghal]

Dear All,

The company is an importer distributor of license keys of software which subsequently exports or sells in the domestic market the license keys to the end user without any modification. Whether the same is liable to Service Tax?

The case is typically of a distributor who is not using the software license for its own purposes.

Regards,

Madhav Kalani

[YAGAY andSUN]

Dear Akash/Madhav,

Supply of PKC and WAU are "service" as held by the Hon‟ble Supreme Court in Idea Mobile Communications Ltd. Vs. CCE &C, Cochin, C.A.No. 6319/2011 = 2011 (8) TMI 3 - SUPREME COURT OF INDIA and accordingly, liable to service tax. Similarly, domestic supply of CALs is incidental to the rendering of telecommunications service as held in the same case i.e. Idea Mobile Communications Ltd Vs CCE& C, Cochin. It would accordingly be liable service tax.

Also refer Ruling No. AAR/ ST/ 04/2013 In Application No. AAR/44/ST/09/2012 Applicant : M/s Microsoft Corporation (India) Private Ltd. = 2013 (9) TMI 110 - AUTHORITY FOR ADVANCE RULINGS, NEW DELHI

Regards,

Team YAGAY & SUN,

Management & Indirect Tax Consultants

 

[Madhukar N Hiregange]

The mode of import is important as well as the terms of the selling for determining VAT/ ST liability.

If one is an intermediary then if ST is payable on downloads then on further sale aslo ST can be charged. VAT also may have to be charged.

AI Summary

Supply of software license keys as service can attract service tax; import mode and intermediary role affect VAT and tax liability. Supply of product keys and activation credentials is characterised as a service for tax purposes and can attract service tax, supported by precedent and an advance ruling. Import mode and contractual sale terms influence whether VAT also applies. If the distributor functions as an intermediary, service tax charged on electronic supplies may extend to subsequent sales by the intermediary.