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TMI Blog2013 (9) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... self comes under the negative list. Further, under Rule 4 of the Place of Provision of Service Rules, 2012, in case service provided in respect of goods that are required to made physically available by the recipient of the service to the provider of the service or to a person acting on behalf of the provider of service, in order to provide the service, the PPS shall be the location where the services are performed. PKC/WAU and CAL - Held that:- Supply of PKC and WAU are “service” as held by the Hon’ble Supreme Court in Idea Mobile Communications Ltd. Vs. CCE &C, Cochin, [2011 (8) TMI 3 - SUPREME COURT OF INDIA] and accordingly, liable to service tax. Similarly, domestic supply of CALs is incidental to the rendering of telecommunications service as held in the same case i.e. Idea Mobile Communications Ltd Vs CCE& C, Cochin. It would accordingly be liable service tax. VL Model (Volume Licensing) - Held that:- (a) Under VL, the software is to be supplied by way of electronic download of software, which involves provision of service and hence taxable. - (b) Applicant has granted license to run Microsoft software under the VL program and supply of software is a “service” and hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully Packaged Products (FPP) model 1A Software on media Q. (1A.3) Whether the domestic transfer of software on media would be liable to service tax in India or not? Q. (1 A.4) Whether the royalty paid by the applicant would be subject to service tax under the Negative List based regime w.e.f. 1 July 2012, under the reverse charge mechanism? Q. (1A.5) Whether the charges paid to TPJW located overseas, for manufacture of licensed Microsoft Products would be liable to service tax under reverse change mechanism in India or not? 1B Games on media Q. (1B.3) Whether the domestic transfer of games on media would be liable to service tax in India Q. (1B.4) Whether the royalty paid by the applicant would be subject to service tax under the negative list regime w.e.f. 1 July 2012 under the reverse charge mechanism? Q. (1B.5) Whether the charges paid to TPJW located overseas, for the manufacture of licensed Microsoft products would be liable to service tax under the reverse charge mechanism in India? 1C Product Key Cards (PKC) and Windows Anytime Upgrades (WAU) and similar products Q. (1C.4) Whether the domestic transfer of PKC/WPU in India would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t products would be liable to service tax under the reverse charge mechanism in India? The applicant s stand and the Revenue s response can be summarised ad seriatim. Before doing so, a brief reference to the factual details highlighted by the applicant in respect of the proposed business model needs to be noted. The technical details necessary for answering the questions are as follows: 1. The FPP model covers: A. Software on media: It is meant for single user/three users/retail consumers; License and media come together in a packaged box i.e. as shrink wrapped software; Software on media includes Microsoft retail software like Windows and Office. A variant of this is the PKC/WAU wherein the retail customer electronically downloads/activates the software that is already preloaded in his computer and the packaged product contains the activation keys. B. Games on media These are meant for retail consumers. License and media come together in a packaged box i.e. as shrink wrapped software. PC games work on Automatic Data Processing machines such as Personal computer, laptops while Xbox ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of royalty for an activity of giving rights to manufacture, replicate, license and sell the Microsoft software may be considered as a consideration for providing a service under the negative list regime and hence liable to service tax. (c) Manufacture of goods falls under the negative list. Further, under Rule 4 of the Place of Provision of Service Rules, 2012 ( PPS Rules ), it is specifically provided that in case of services provided in respect of goods that are required to be made physically available by the recipient of service to the provider of service, or to a person acting on behalf of the provider of the service, in order to provide the service, the place of provision of service shall be the location where the services are performed. In the instant case, the rights to manufacture will be provided by the applicant to the TPJW outside India. Further, the TPJW may use CDs and other materials and other materials for manufacturing the software based on specifications provided by applicant. Thus, Rule 4 will apply to this transaction and the place of provision of service will be the place where the services are performed i.e. outside India. Accordingly, there s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. It is also stated that stand taken vis- -vis Software on media at para (b) and (c) are applicable. Thus here also the stand of the applicant and the department on the issue is the same So far as VL Model is concerned the issues are as follows: (a) Applicability of service tax on electronic download of software in the case of VL model. (b) Applicability of Service Tax on Domestic Transfer of VL software licence both under physical and electronic medium. (c) Applicability of service tax on domestic transfer of billable VL media (d) Applicability of service tax on royalty payable by applicant under the Negative List regime w.e.f. 1st July 2012. (e) Applicability of service tax on charges paid to TPJW by the applicant under reverse charge mechanism. The applicant s stand inter-alia is as follows: (a) Electronic download of software amounts to service and therefore, service tax is leviable (b) Service tax is leviable as supply of software licenses under VL programme involves provisions of service. (c) Service tax will not apply to transfer of billable VL media In addition the submissions in relation to software on Software Media para (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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