TaxTMI 
TaxTMI 
we have been charged by the vendors for the customised software service tax and VAT.Is it correct?
Vat and service tax on software
29 Oct 2009 
3 Replies 
2321 Views Asked by
Classification of software as service or sale determines tax treatment; customised software is service, packaged copies may attract VAT.
Classification of software as either a supply of goods or a supply of services determines VAT or service tax liability. Customized software created exclusively for a client is typically a service under a works contract and not subject to VAT, while VAT may apply to packaged software or tangible media supplied with the service. Retained resale rights by the supplier can bring the transaction within packaged-software VAT treatment. Contractual terms, IP ownership, and resale rights are decisive for tax characterisation. (AI Summary)
Classification of software as either a supply of goods or a supply of services determines VAT or service tax liability. Customized software created exclusively for a client is typically a service under a works contract and not subject to VAT, while VAT may apply to packaged software or tangible media supplied with the service. Retained resale rights by the supplier can bring the transaction within packaged-software VAT treatment. Contractual terms, IP ownership, and resale rights are decisive for tax characterisation. (AI Summary)