Calculation of service tax on Computer Software License

[Deepak Goel]

Please tell me how to calculate service tax on Computer Software License :- 1. Whether add VAT in the value of product first and then calculate service tax on value of product and VAT. 2. Service Tax and VAT is to be calculated on value of product. This is very urgent.

Deepak Goel

Mob No. 9818112228

[Guest]

I am of the view that Both Service tax and VAT is to be calculated separately on the value of the product alone. There is no question of any levy of tax on tax as both are indepdent and separate legal levies.

[Guest]

Vat should be calculated on service tax also. First basic price , then add service tax then calculate VAT on the entire amount

[Guest]

I differ from the views of Mr T Sundaram. There cannot be any levy of tax on tax and both service tax and VAT should be levied independently only on the value of the product.

[Surender Gupta]

Service Tax and VAT both may be charged on the basic value without including the either for the purpose of calculating tax. Here it is important to note that it is not the case of tax on tax. Please refer to system of excise. In central excise in the value of manufactured goods first duty of excise is added in to the basic value. VAT / Sales tax is calculated on the total of basic value and excise duty. But, here it is important to note that excise duty is levied on manufacture. The event of manufacture is occurred first and therefore, duty of excise is levied first. Sales tax is levied on the value of goods sold. As per the scheme of Constitution of India, service tax and VAT both are mutually exclusive. A transaction can not be a service as well as sales. But, unfortunately, our legislatures are not issuing any clear cut guidelines and therefore, a wide confusion has spread over the taxability of a genuine transaction. Accordingly, as per the constitutional provisions, as apparent, neither service tax nor vat has priority over each other and therefore, if someone likes to charge both, he may charge both the tax on the basic value only.

[DEV KUMAR KOTHARI]

The best course is to ascertain the value of goods sold ( in form of software) and value of service rendered, if any, separately. Suppose a software is sold and its packet price is Rs.5000/- and after discount it is sold for Rs.4500/- this is on basis of as is where is basis. without any charge for service. so it is subject to VAT. ow suppose service for on line installatiion, guidance, and after sale service - for updates is provided, and charge is Rs.1000 per annum, then this will be value of service rendered/ to be rendered over a period of one year. This may be subject tolevy of service tax. Value of goods sold cannot be included in value of service or vice versa. However, both charges have to be shown to have nexus with gfoods sold and service rendered and reasonable allocation if to be established.

AI Summary

Debate Over Calculating Service Tax on Software Licenses: Should VAT Include Service Tax or Be Calculated Separately? A forum discussion addresses how to calculate service tax on computer software licenses. Participants debate whether VAT and service tax should be calculated independently on the product's value or if VAT should include service tax. One participant argues that both taxes should be levied separately without tax on tax, while another suggests calculating VAT on the total amount including service tax. Another participant highlights the lack of clear guidelines, emphasizing that service tax and VAT are mutually exclusive. A final suggestion is to separately value goods and services to determine the applicable taxes.