service tax on ESD (electronic software distribution)

[rajesh rathore]

Dear Sir,

Please advise us that is it both service tax and sale tax can apply to ESD software i.e. Electronic software distribution or only one can applicable as per current tax policy in india.

Regards

Rajesh Rathore

MPACI, Neemrana.

Rajasthan, India.

[CASeetharaman KC]

Digital distribution (also called content delivery, online distribution, or electronic software distribution (ESD), among others) describes the delivery of media content such as audio, video,software and video games, without the use of physical media usually over online delivery mediums, such as the Internet. Digital distribution bypasses conventional physical distribution methods, such as paper or DVDs. The term online distribution is typically applied to freestanding products; downloadable add-ons for other products are more commonly known as downloadable content. Electronic Sofware Disrtibution is therefore a service  and the following questions need to be answered for determining taxability:

What is the place of provision of the service?

Is the place of provision in taxable territory? If yes, tax will be payable. If not, tax will

not be payable.

Is the provider ‘located’ in the taxable territory? If yes, he will pay the tax.

If not, is the service receiver located in taxable territory? If yes, he may be liable to

pay tax on reverse charge basis.

[rajesh rathore]

Dear Sir,

Thanks for reply,

But still it is not clear that which tax should be charged to us (i.e. Service tax/Sale tax on ESD).

So please give some notification details for same.

Regards

Rajesh Rathore

 

[CASeetharaman KC]

 As per Section 66B of the Finance Act , 1994. To be a taxable a service should be -

  ♦  provided or agreed to be provided by a person to another

  ♦  in the taxable territory

  ♦  and should not be specified in the negative list.

In your case the service is not specified in the negative list and so what is important is to find out whether it is provided in the Taxable Territory

[MITSUI PRIME ADVANCED]

Dear Sir,

 

Thank for reply

 

I am taking about  "Electronic Software distribution" means software downloading from Seller website and seller will provide licence

this type of contain specied metiona in any notificaiton or any rule or any allied section.

 

Regards

 

Arjun Sachdeva

[CASeetharaman KC]

After the introduction of the Negative List concept all services are taxable unless they figure in the Negative List or Exemption List. Electronic Software Distribution is therefore a taxable service as it does not figure in any of these lists. To my knowledge there is no specific notification on this issue

[JAMES PG]

It has been clarified in the Education Guide on Service Tax that  if the software is put on media like CD's or embedded on the computer before sale, the same would be treated as goods and is subject to Sales Tax and not Service Tax. If the software is delivered online or is downloaded on the internet, the same woould not be treated as goods as software as the judgement of SC in TCS case is applicable only in the case of pre packaged software

AI Summary

Taxability of electronic software distribution: treated as a service unless delivered on physical media, subject to place of provision.
Electronic software distribution delivered online or by download is treated as a taxable service unless listed in the Negative List; taxability depends on the place of provision and the territorial location of the provider or recipient, with provider location creating supplier liability and recipient location potentially attracting reverse-charge. Software supplied on physical media or embedded before sale is treated as goods and attracts sales tax rather than service tax.