Dual Taxation Concept, Service Tax

[CHITRA RAGURAM]

An IT company selling software to our company raised the bill as follows:

Product Value - 100

Service Tax - 10.3

VAT - 4% on 110.30

On enquiry, they replied this is dual taxation concept. Service Tax and VAT both applies for software. Also i feel, since this is a technical service TDS to be deducted u/s. 194J. Please advice

Posts / Replies

[rishi mohan]

Sir, on purchase of software no tds shall be deducted while making the payment, but the tds u/s 194(J)  shall be deducted on installation charges.

[Pramod Tyagi]

Since Information Technology Software Service was covered under Service Tax in May 2008, Service tax has become applicable on all software services. So even if it is a sale of a software product it is covered under Service Tax. Unfotunately Right to use is also treated as a Product under VAT and is leviable to VAT also. So while the common belief is that it is only one of the two taxes that is leviable. In software both are levied. Yes, there is a contention whether VAT is to be levied on 100 or 110.3. My view is that it is to be levied on 100 since VAT includes all duties in the selling price but not taxes and Service tax is a tax that occurs at the same point of time as VAT and so it should be levied on 100.