TMI Blog2022 (4) TMI 1290X X X X Extracts X X X X X X X X Extracts X X X X ..... f Services stipulates that the SAC 997331 covers Licensing services for the right to use computer software and databases but excludes the services of limited end-user licence as part of packaged software from the said SAC. Hence the supply made by the applicant is covered under Supply of goods and the said supply is covered under tariff heading 8523. Applicability of N/N. 45/2017-Central Tax (Rate) dated 14.11.2017 - HELD THAT:- The Notification No.45/2017- Central Tax (Rate) dated 14.11.2017 and Notification No.47/2017-Integrated Tax (Rate) dated 14.11.2017 stipulates the rate of CGST / IGST @ 5%, if the goods of computer software is supplied to public funded research institutions subject to fulfillment of the conditions prescribed under column 4 of the said notification - In the instant case the applicant is supplying computer software to a public funded research institution, under the administrative control of DRDO, Government of India. Further the said institute has also furnished a certificate as required to fulfill the required condition. - Benefit of notification available. - KAR ADRG 11/2022 - - - Dated:- 21-4-2022 - DR. M.P. RAVI PRASAD AND SRI. T. KIRAN REDDY, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring goods and software, is raised; that in the case where the software is supplied separately, a standalone invoice is raised separately. 4.2. The Applicant has also furnished the mode of delivery of software to their customers, which is as under:- a) The customer places the order with the Applicant for an equipment along with the software or for standalone software. b) The Applicant sources the required products from other keysight entities outside India. c) The applicant acts as a reseller of Keysight products in India 4.3. The applicant submitted that Keysight equipment are used by various research institutions which can be configured to suit the needs of each institution for the same purpose. The equipment may be configured by purchasing various software and in most cases the software is embedded in the equipment. Software can also be downloaded and installed on equipment / hardware supplied by the applicant. Some software can also be downloaded and installed on user's own PC. All the software whether embedded in product or downloaded from website of the applicant, require a license to be activated through a license key. The Applicant supplies the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... software is controlled through 'encryption keys' and the software is not developed for any specific client and the same software is sold to all the clients as it is 'pre-designed' and 'pre-developed'. 4.8 The applicant, on the supply of software to the Public Funded Research Institutions and Institutions registered with Government of India, is presently charging GST at the rate of 18% as per sl.no. 17(ii) of Notification No. 11/2017-CGST (Rate) dated 28.06.2017 treating it as supply of service under SAC 9973 as the supply of software i.e. right to use a certain intellectual property in the form of software clearly amounts to supply of services in terms of entry number 5(c) of Schedule II of the CGST Act 2017. 4.9 The applicant submitted that the institute, to whom they have supplied the software licenses charged GST at 18%, have disputed the payment of GST at the rates charged by them. It is their (Customer/institutions) understanding that the supply of software license is covered under 'computer software' as specified in Notification No.45/2017-Central Tax (Rate) dated 14.11.2017 and is taxable at the concessional GST rate of 5%, as the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CGST Act 2017, development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software and temporary transfer or permitting the use or enjoyment of any intellectual property right are treated as services. But, if a pre-developed or pre-designed software is supplied in any medium/storage (commonly bought off-the-shelf) or made available through the use of encryption keys, the same is treated as a supply of goods classifiable under heading 8523. f) In the instant case, the software license(s) supplied by the applicant is generally used by the customer for designing / validating / manufacturing the parts/systems in industries like Aerospace and defence, Automotive and Energy, Communications, Education and Heavy Equipment, Machinery etc., and hence the same could be used by the customers in different fields depending on their requirement. Further the said software license(s) is a package software and not tailor made one, to suit individual requirement and these software are pre-designed and pre-developed and the usage is controlled through encryption keys . g) A software licence may not qualify as go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able and hence the goods supplies is Computer Software and more specifically Application Software . The Explanatory Notes to the Scheme of Classification of Services stipulates that the services of limited end-user licence as part of packaged software are excluded from the SAC 997331. Thus the supply made by the applicant is covered under Supply of goods . Though the Advance Rulings are applicable only to the respective applicants, the principles and rationale applied in the cases cited supra can be applied to the instant case as the facts and activities are similar in nature. Therefore the Computer Software supplied by the applicant qualifies to be treated as goods and covered by the Notification mentioned above and consequently, the concessional GST rate of 5% is available. PERSONAL HEARING 6. Ms. Neethu James, Advocate Authorized Representative of the applicant appeared for personal hearing proceedings held on 10.02.2022 before this authority reiterated the facts narrated in their application. FINDINGS DISCUSSION 7. We have considered the submissions made by the applicant in their application for advance ruling. We also considered the issues in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Tata Consultancy Services Vs. State of Andhra Pradesh [2004 (178) ELT 22 (SC)] and also the Explanatory Notes to the scheme of classification of services under GST. 11. In view of the above, the issue before us to decide is the classification of the supply of software licence by the applicant i.e. whether it amounts to supply of goods or services. We observe that the software supplied by the applicant is a pre-developed or pre-designed software and made available through the use of encryption keys and hence it satisfies all the conditions that are required to be satisfied to cover them under the definition of 'goods'. Further the goods which are supplied by the applicant cannot be used without the aid of the computer and has to be loaded on a computer and then after activation would become usable .and hence the goods supplied qualifies to be Computer Software and more specifically covered under Application Software . Further the Explanatory Notes to the Scheme of Classification of Services stipulates that the SAC 997331 covers Licensing services for the right to use computer software and databases but excludes the services of limited end-user licence as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te to the supplier from the Head of the Institution, in each case, certifying that the said goods are required for research purpose only. 14. The applicant contends that computer software is described as goods in the notification supra and hence the term goods is more generic in nature; the purpose of the notification is to offer a reduced rate of GST to certain institutions for the purpose of research or furtherance of research and hence exclusion of computer software on mere technical grounds would defeat the purpose of the notification and thus claims that they are entitled to the benefit of notification supra. 15. The applicant furnished the copy of invoice raised relevant to the respective transaction wherein they supplied the software licence to Research and Development Establishment (Engineers), Pune, along with a copy of certificate issued, under Notification No47/2017-Integrated Tax (Rate) dated 14.11.2017, by the Director, R DE, (ENGRS), Pune, who is holding the rank in the pay scale higher than that of the Deputy Secretary to Government of India, from which it is observed that the said Institution falls under 'Public funded research institution' and is und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime of supply of the specified goods; (ii) The institution produces, at the time of supply, a certificate to the supplier from the Head of the Institution, in each case, certifying that the said goods are required for research purposes only; (iii) In the case of supply of live animals for experimental purposes, the institution produces, at the time of supply, a certificate to the supplier from the Head of the Institution that the live animals are required for research purposes and enclose a no objection certificate issued by the Committee for the Purpose of Control and Supervision of Experiments on Animals 16. The Notification No.45/2017- Central Tax (Rate) dated 14.11.2017 and Notification No.47/2017-Integrated Tax (Rate) dated 14.11.2017 stipulates the rate of CGST / IGST @ 5%, if the goods of computer software is supplied to public funded research institutions subject to fulfillment of the conditions prescribed under column 4 of the said notification. In the instant case the applicant is supplying computer software to a public funded research institution, under the administrative control of DRDO, Government of India. Further the said institute h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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