VAT and service tax both Applicable on software services

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Many of us were expecting some relief on the double taxation of software services where in software is treated as goods and charges VAT at the same time being treated as service and charges service tax but the result from this time budget is same.

The IT sector was also expecting some relief in terms of the removal of the double levy of VAT and service tax on software licensing. With the service tax law moving into the negative list based scheme, the IT sector will have nothing to gain. That the Union Government would continue to levy service tax on software services without considering the fact that transfer of goods are also involved, becomes clear, when one goes thro’ the voluminous Budget circular issued by the Board, on service tax issues. The TRU Circular seems to legitimize the levy of service tax on the entire value of software related transactions such as license fee, annual maintenance contracts, etc.


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