2020 (4) TMI 872 - AAR - GST

Classification of supply - supply of goods or not - software supplied by the applicant - Computer Software or not - Applicability of N/N. 45/2017-Central Tax (Rate) and 47/2017-Integrated Tax (Rate) dated 14.11.17 to the supplies made to the institutions given in the notification - HELD THAT - The applicant states that he purchases the off-the-shelf software which are not developed for any specific client and the same software is sold to all the clients. Hence the software sold 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 is computer software and more specifically covered under Application Software . Hence the supply made by the applicant is covered under supply of goods and the goods supplied are covered under the HSN 8523. Applicability of N/N. 45/2017- Central Tax (Rate) dated 14th November, 2017 - HELD THAT - The computer software are covered in the column (3) of the Table present in the Notification No. 45/2017 - Central Tax (Rate) dated 14th November, 2017 as amended from time to time. If they are sold to such recipients as covered under Column (2) of the Notification and if they are satisfies the conditions specified in Column (4) of the Notification, then the supply of such computer software would be liable to tax at 2.5% under the CGST Act.

Summary

Issues:
1. Whether software supplied qualifies as Computer software resulting in Supply of goods?
2. Applicability of Notifications No. 45/2017-Central Tax (Rate) and 47/2017-Integrated Tax (Rate) to specific institutions.

Analysis:

Issue 1: Whether software supplied qualifies as Computer software resulting in Supply of goods?
The applicant, a private limited company supplying software, sought an advance ruling on whether the software supplied qualifies as goods. The applicant purchases pre-developed software from a principal partner and resells it to customers, mainly government departments and public institutions. The software is not tailored to individual requirements but is packaged software used across various industries. The applicant argued that the software should be treated as goods based on a Supreme Court ruling that canned software is considered goods for sales tax purposes. During the personal hearing, it was clarified that the software is pre-designed, pre-developed, and controlled through encryption keys. The Authority found that the software sold by the applicant meets the criteria to be considered goods, specifically computer software under HSN 8523.

Issue 2: Applicability of Notifications No. 45/2017-Central Tax (Rate) and 47/2017-Integrated Tax (Rate) to specific institutions
The Authority examined Notification No. 45/2017-Central Tax (Rate) dated 14th November, 2017, which specifies a concessional tax rate for goods supplied to certain institutions. The entry in the notification includes computer software among the goods eligible for the concessional rate subject to specified conditions. The Authority verified that if the software is sold to institutions listed in the notification and meets the conditions, it would be taxed at a reduced rate. The ruling confirmed that the benefits of the notifications apply to the supplies made by the applicant if the recipients are covered under the notification and meet the specified conditions.

In conclusion, the Authority ruled that the software supplied by the applicant qualifies as goods and computer software under the relevant notifications, making them eligible for concessional tax rates when supplied to specified institutions.