India is the second largest populated country in world were more number of people employed in IT sectors. Millions of people find their effective career in Information technology sector by the foreign companies as well as by Indian companies. People working in IT sector are compelled to pay their service tax as per the service tax act in India. In this article we are clearing about the service tax requirements in IT sector.
IT sectors- Service tax in India
There are few services related to IT sector need to pay their service tax by following the respective regulations as per the Indian government. Let us see the services which have to pay their taxes:
- Software development sectors
- Software development in the phase of analysis, design and programming
- The services similar to IT like adaptation, enhancement, up gradation, implementation
- Proper advice and consultation is provided for the IT software implementation by making the feasibility study, database design, initial guidance for the new design startup, database security
- There are rights to use software fir the commercial purposes on buying and selling it along with the rights to use software components to produce other software
- Providing rights to the supply of IT Software electronically
So simple you can understand about IT software is something in machine readable form which defines instructions, sound, images, and source code everything by means of a computer (automatic data processing machine) or any other device.
Service tax regulations contains certain amendments for the IT related services is provided as follows:
- Software development includes its study, analysis, coding part
- The process of adaptation, up gradation and other similar IT services
- Feasibility studies for the system implementation
- Initial startup requirements for a new system
- Provision for the database maintenance and security
Rights to use the IT software:
- Buying and selling of IT software for the commercial purposes
- Use of software components for the re development of other software
- IT software supply electronically
How to apply service tax or VAT for software?
Software product which is packaged to sell with VAT registration are required to apply for service tax. While doing MRP evaluation the packaged software’s 15 percentage is applied for tax. If the software transaction gives an output of “transfer of right to use” depends the application of service tax or VAT for the software. The case of transfer of possession and also the effective control towards the goods to the customers are applied for VAT. Service tax for the software is applicable for the software service or cloud computing service. As you know the complexity involved in the service tax or VAT for a software, it is better to consult or expert for more information.
How will be tax for the export IT services?
Export IT services do not apply Service tax on usual case but may be applicable for few cases were the product have to follow service rules. So simply need of an expert is required you to guide the service tax or VAT for your software after a detailed consultation.
