Applicability of service tax on software and website development

[Guest]

I am in the business of software and website development. I develop the software inhouse, but acquire the domain and web-space from other agencies. Does my work come under Service or Sales Tax?

[Surender Gupta]

If you are getting any commission from re-sale of domain or web-space, the provision of service tax may be applicable. On the other side, since the Designing Services are proposed to included, you must be careful for service tax on website development.

[Madhukar N Hiregange]

In my view till Fin Act 2007 you would not be liable as your main activityis one of software development. Section 65A sets out that in a composite service the dominant one is to be considered. Of course if you charge all composnents separately then there maybe a liability on other activties. Resale of a service in my view is not liable to servcie tax as you would be a servcie tarder and not a servcie provider. This view however requires judciial concurence

AI Summary

Composite service characterisation controls service tax on software and website development; dominant component determines taxability. Applicability of service tax to software and website development depends on whether the supply is a composite service with a dominant component; in house software development as the primary activity will generally be treated according to the dominant element. Separately charged components such as domain or web space may attract service tax individually, and commission from resale of such services can be taxable, whereas treating resale as trading may avoid liability but lacks clear judicial concurrence.