Service tax and VAT on Software?

[deepak kalambate]

Dear Sir,

We have purchased MS Office 2010 software (open license) from from Microsoft. It was routed through local dealer.

The Dealer has charged Service Tax and VAT both in the invoice.

Pl advise whether he can charge service tax and also vat both in this type of transaction as this is purely software license purchase transction.

 

AI Summary

Packaged software as goods: VAT applies, whereas bespoke software transactions may attract service tax under tax classification rules
Packaged or "canned" software supplied in marketed form (on media or via retailed license packages) constitutes goods for fiscal taxation because the marketed copy is movable property capable of being bought, sold, stored and transferred; therefore VAT/CST treatment applies. Bespoke or customized software that is essentially a service remains subject to service tax principles. Administrative circulars further classify paper licenses and PUK cards by physical character for customs and indicate valuation and excise/service tax allocation rules to prevent double taxation.