Applicability of excise duty or service tax - packaged software

[Sanjeev Sharma]

A new Company has started devloping software and which will be sold as Packaged software to their customers. Along with VAT , whether Company has to charge Excise Duty or Service Tax . Being a company owned by Foreign Comapny, whether exemption limit of 1.50 crore in excise can be availed.

[Mukesh Kumar]

Development and sale of packaged software is subject to duties of central excise and local VAT. There is no service tax on packaged software. In case of central excise duty, the status of assessee is no material. Where the development and sale activity is being done in India, he can claim for exemption upto 1.5 crores subject to the other conditions of notification no. 8/2003 CE dated 1.3.2003 as applicable to SSI units. On the other side, if the development activity is being done outside India and the same is sold in India after being import, the same is subject to Customs Duty. In that case, there is no question of exemption.

AI Summary

Excise duty on packaged software applies to domestic sales; imports attract customs duty and no service tax applies.
Packaged software developed and sold in India is subject to central excise duty and local VAT and is not liable to service tax; domestic developers may claim the SSI exemption threshold subject to the conditions of the applicable excise notification. Software developed abroad and imported into India is subject to customs duty and does not qualify for the SSI exemption when treated as an import.