Dual Taxation Concept

[Asked by Guest]

An IT company selling software to our company raised the bill as follows:

Product Value - 100

Service Tax - 10.3

VAT - 4% on 110.30

On enquiry, they replied this is dual taxation concept. Service Tax and VAT both applies for software. Also i feel, since this is a technical service TDS to be deducted u/s. 194J. Please advice

AI Summary

Dual taxation of software: service tax and VAT can both apply, with TDS required only on installation services.
Dual taxation occurs where both service tax and VAT are imposed on software: service tax has been applied to software services since May 2008, while VAT treats the right to use software as a product. TDS is not deducted on the purchase price of software, but TDS under provisions applicable to technical or professional services applies to installation charges. There is a disputed issue whether VAT should be calculated on the pre-service-tax sale price or on the service-tax-inclusive amount, with a view that VAT should exclude contemporaneous service tax from its base.