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MOBILE INSURANCE AND ANTI THEFT MOBILE APP - VAT OR SERVICE TAX

MOBILE INSURANCE AND ANTI THEFT “MOBILE APP” - VAT OR SERVICE TAX - Service Tax - By: - Rishi Chanan - Dated:- 4-4-2015 - Now the day s companies have started providing smartness and security to smart phones by providing/selling insurance and anti theft application on mobile through software (mobile app) operated by them and other allied services to the consumers through their distributors and retailers. Now the following questions arise: - Whether the companies are liable for service tax or VAT .....

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dia Restore, Scream Via Friend's Phone, App Privacy Lock, Phone Doctor, Smart Sense through mobile app . The definition of Mobile App retrieved from wikipedia as follows: A mobile app is a computer program designed to run on smartphones, tablet computers and other mobile devices. Apps are usually available through application distribution platform, which began appearing in 2008 and are typically operated by the owner of the mobile operating system, such as the Apple App Store, Google Play, W .....

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or those goods used or to be used in the construction, fitting out, improvement or repair of movable or immovable property and also includes all growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale and also includes motor spirit. Sale is defined in Section 2(n) as follows: 2(n) Sale with all its grammatical variations and cognate expressions means every transfer of the property in goods whether as such go .....

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y instalments shall, notwithstanding the fact that the seller retains the title in the goods, as security for payment of the price, be deemed to be a sale. Explanation II : Notwithstanding anything contained in the Indian Sale of Goods Act, 1930 (a) (Central Act III of 1930) a sale or purchase of goods shall be deemed, for the purpose of this Act to have taken place in the State, wherever the contract of sale or purchase might have been made, if the goods are within the State. (i) in the ca .....

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te contracts in respect of the goods at each of such places. Explanation III: Notwithstanding anything contained in this Act or in the Indian Sale of Goods Act, 1930 (Central Act III of 1930), two independent sales or purchases shall for the purposes of this Act, be deemed to have taken place. (1) When the goods are transferred from a principal to his selling agent and from the selling agent to his purchaser, or (2) When the goods are transferred from the seller to a buying agent and from the bu .....

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ed for a fictitious or non-existent principal. Explanation IV : A transfer of right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration shall be deemed to be a sale. Is the software Goods ? The question is very important and is relevant to decide its taxability. Under Article 366(12) of the Constitution of India, Goods include all materials, commodities, and articles. In the landmark judgment of Bharat Sanchar Nigam .....

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nd include all types of movable properties, whether these properties be tangible or intangible. We are in complete agreement with the observations made by this Court in Associated Cement Companies Ltd., 2001 (1) TMI 248 - Supreme court of India. A software programme may consist of various commands which enable the computer to perform a designated task. The copyright in that programme may remain with the originator of the programme, but the moment copies are made and marketed; it becomes goods, w .....

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not just of the media which by itself has very little value. The software and the media cannot be split up. What the buyer purchases and pays for is not the disc or the CD. As in the case of paintings or books or music or films, the buyer is purchasing the intellectual property and not the media; i.e., the paper or cassette or disc or CD. Thus a transaction of sale of computer software is clearly a sale of goods within the meaning of the term as defined in the said Act. The term, all materials, .....

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) capable of being bought and sold; and (c) capable of transmitted, transferred, delivered, stored and possessed. If a software whether customized or non-customized satisfies these attributes, the same would be goods. Canned software means that is not specifically created for a particular consumer. The sale or lease of, or granting a license to use, canned software is not automatic data processing and computer services, but is the sale of tangible personal property. When a vendor, in a single tr .....

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ade and marketed, it becomes goods, which are susceptible to sales tax. Even intellectual property, once it is put on to media, whether it be in the form of books or canvas (in case of painting) or computer disks or cassettes, and marketed would become goods . The Circular/Letter D. O. F. No. 334/1/2008-TRU, dated 29-2-2008 issued by Central Board of Excise and Customs discusses salient features of the changes made by the Finance Act, 2008. It states in Para 4.4.1., that: Transfer of the right t .....

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or use, with no legal right of possession and effective control. Transaction of allowing another person to use the goods, without giving legal right of possession and effective control, not being treated as sale of goods, is treated as service. It further states in Para 4.4.3, that: Proposal is to levy Service Tax on such services provided in relation to supply of tangible goods, including machinery, equipment and appliances, for use, with no legal right of possession or effective control. Suppl .....

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present scenario. What is value chargeable to Service Tax, if applicable? S. 67 of the Finance Act, 1994 contains provisions for valuation of service for charging Service Tax and Rule 3 of the Valuation Rules provides Manner of determination of value of taxable service. There are instances when some services are provided free of cost. The courts of law have held that no service Tax can be charged for free services. (i) Bharati Cellular Ltd. v. CCE, 2004 (10) TMI 6 - CESTAT (NEW DELHI) (ii) Kamal .....

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oker did not charge brokerage in respect of certain transactions, it was held that S. 67 does not have any deeming provision and hence Service Tax is not leviable. Very important observations are made by the Supreme Court in the case of Bharat Sanchar Nigam Ltd. v. Union of India, 2006 (3) TMI 1 - Supreme court. The Court observed that the definition of the word Sale in Article 366(12) was not altered and hence the same has to be understood as under the Sale of Goods Act, 1930. Further, importan .....

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covered or bifurcated. The test therefore for composite contracts other than those mentioned in Article 366(29A) continues to be - did the parties have in mind or intend separate rights arising out of the sale of goods. If there was no such intention, there is no sale even if the contract could be disintegrated. The test for deciding whether a contract falls into one category or the other is as to what is the substance of the contract. We will, for want of a better phrase, call this the dominant .....

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legislative Act comes up for consideration, endeavours shall be made to see that provisions of both the Acts are made applicable (Para 27). Payments of Service Tax as also VAT are mutually exclusive. Therefore, they should be held to be applicable having regard to the respective parameters of Service Tax and sales tax as envisaged in a composite contract as contradistinguished from an indivisible contract. It may consist of different elements providing for attracting different nature of levy. It .....

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tware. However in case of the software dealer the position is slightly different. The software is not developed by him, but he has got the rights to sale/market/deployment of the licence/right to use. Except this, there is no difference between the two. It is permitted to make only minor modifications to the extent of incorporating the name, etc. as per the specific requirements/parameters of the purchaser, without changing any basic structure of the software. The vendor is also in some cases, m .....

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