SERVICE TAX ON SOFTWARE DEVELOPMENT AND CONSULTING EXPENSES

[LILUWENDRA CHATURVEDI]

We are paying Rs 65,000.00 Per Month to consultants on account of  development of software  consultancy for maintenance. Service tax is applicable but the service provider do not charge.

Please clarify following:

Are we liable to pay service Tax  as service receiver?

If yeas . What will be percentage. Will it be under maintenance and repair As 70 percent ?

Regards

 L.K.Chaturvedi

[YAGAY and SUN]

Dear Liluwendra,

You are not liable to pay the service tax under reverse charge mechanism as these services are not covered under Notification No. 30/2012-ST/20-06-2012 w.e.f. 01-07-2012.  Further, it may be possible that the service provider is availing the benefit of threshold limit.  Please check the facts from the service provider.

Regards

Team YAGAY & SUN

(Management & Indirect Tax Consultants)

[Madhukar N Hiregange]

First of all it is assumed that the services are from within India. Maintenance of software as understood today is not a works contract. As long as you have the correct address of the service provider and are paying by cheque it would be said that due care has been taken. If he is not paying then you are not liable.

[LILUWENDRA CHATURVEDI]

Dear Mr.Pradeep Khatri

Thanks for your reply . I m fully convinced .

Regards

Chaturvedi

[LILUWENDRA CHATURVEDI]

Dear Sir,

Please confirm whether we can avail Cenvat Credit  of Service tax paid  under VCES scheme. Suppose  one service provider have paid  Service tax  Rs 75000/ in Dec 2013 and balance Rs 75000/- in May2014 in case of past liability upto Dec 2012. Can We avail Cenvat Credit of    Rs 1,50'000.00? is there any time limit ? If so please advise. 

Regards

L.K.Chaturvedi

Chaturvedi

[YAGAY and SUN]

Dear Liluwendra,

You can avail the CENVAT credit after following the provisions of VCES and CENVAT credit Rules, 2004 as amended from time to time.

Regards

YAGAY and SUN

(Management and Indirect Tax Consultants)

AI Summary

Reverse charge on software consultancy services not applicable; service receiver not liable; Cenvat credit subject to VCES and Cenvat rules.
Payment for software development and consultancy services does not trigger recipient liability under the reverse charge mechanism per Notification No. 30/2012-ST; the provider may be under the threshold exemption and recipient due care (correct address, payment by cheque) mitigates liability. Software maintenance is a service distinct from a works contract. Cenvat credit for service tax discharged under VCES is permissible only by following VCES provisions and the Cenvat Credit Rules, 2004 as amended, including any procedural or time limit conditions.