ST + VAT charged on base value of sofware cost, VAT + CST

[AP Singh]

We are resellers. we get Microsoft Licenses billed from distributor (REDINGTON) where they charge ST + VAT both on licenses we purchase for our end customer e.g. If base value of the software is ₹ 100 they charge 15% ST on base value and VAT on ₹ 115 (which includes ST).

Though it is happening since we started doing our reselling business and as confirmed from others same is happening all over india. however in one of the case when we billed the same way we get the reply from the customer as mentioned below

Under Section 93 of the finance Act,1994,so much of the value is exempt from taxable service

As is equal to the value of goods and materials sold by the service provider.

(Notification no.12/2003 ST dtd.20/06/2003 effective from 01/07/2003.

If service tax is not leviable,then as per Notification no.12/2008 CE dtd.01/03/2008 read with notification no. 49/2006-CE dtd.30/12/2006 Excise duty at the rate of 12% is applicable on off the shelf software under tariff heading 8523.

As S4U does not have excisable turnover so the excise duty is also not applicable.

We request you to please help how we can clear this customers query showing legal docs if there is any. They are also saying that IF both taxes are applicable then on specific % age ST will charged and on rest VAT will be charged.

Please assist.

AP SINGH

Posts / Replies

[Ganeshan Kalyani]

Both service tax and VAT is applicable. This is because state considers it as transfer of right to use the goods which is deemed as sale. And the central considers as service.

[KASTURI SETHI]

Notification No.12/2003-ST dated 20.6.2003 has rescinded vide Notification No.34/12-ST dated 20.6.12. I support the views of Sh.Ganeshan Kalyani, Sir.

[YAGAY AND SUN]

In addition to above replies, please also check following advance ruling on this matter.

M/s Microsoft Corporation (India) Private Ltd., Versus The Commissioner of Service Tax, 2013 (9) TMI 110 - AUTHORITY FOR ADVANCE RULINGS, NEW DELHI