VAT Input Credit on Software License

[Dinesh Kumar T S]

A manufacturing concern obtained a software license for certain period. The service provider has charged 4% VAT (Tamilnadu VAT) in the bill in addition to service tax. The company is eligible for taking credit of Input VAT for other goods.Whether input tax credit be availed by the manufacturing concern for software License?

AI Summary

Manufacturing Company Seeks Input VAT Credit for Software License; Clarification Needed Under TNVAT Act. A manufacturing company inquired about the eligibility for input VAT credit on a software license, which was charged 4% VAT in Tamil Nadu. The response clarified that under the TNVAT Act, input tax credit (ITC) is generally allowed for capital goods used in business. Since software licenses are capitalized and treated as capital goods, ITC should be permissible. However, as the TNVAT Act does not explicitly address software licenses, it is recommended to seek advice from a consultant or request clarification or an advance ruling from the VAT Department.