TaxTMI 
TaxTMI 
Sir,
What is the tax to be levied on software development? What are the circumstances in which only Service Tax is applicable and only Sales tax is applicable? Whether there are any circumstances where both the taxes are applicable?
Software development
05 May 2017 
4 Replies 
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Service Tax on software development depends on whether supply is a service or a sale; VAT may apply in other modes.
Applicability of indirect taxes for software development depends on the nature of supply, mode of delivery, and end use: Service Tax may apply where software is provided as a service (bespoke or with ongoing obligations), VAT may apply where software is treated as a sale of goods or packaged product, and both can arise in particular factual matrices; Central Excise duty has been exempted and classification in the tariff chapter aids but does not alone determine taxability. (AI Summary)
Applicability of indirect taxes for software development depends on the nature of supply, mode of delivery, and end use: Service Tax may apply where software is provided as a service (bespoke or with ongoing obligations), VAT may apply where software is treated as a sale of goods or packaged product, and both can arise in particular factual matrices; Central Excise duty has been exempted and classification in the tariff chapter aids but does not alone determine taxability. (AI Summary)