By Ramdas S, CRN, March 15, 2010, 1230 hrs
Software resellers are a worried lot, trying to figure out the interpretations of the new amendments to software taxation. While the Infotech Software Dealers Association (ISODA) is yet to figure out the finer details of budget notification, its leadership team predicts that prices of multi-user retail packs will go up in the near future.
"Despite multiple rounds of discussion with various financial and tax consultants on the recent notifications, we are yet to get a complete clarity; especially since their views are contradicting. We believe single-user retail pack sales will not attract TDS. However, despite sending several mails, distributors are yet to revert back with their own action plans on billing software," said Devesh Aggarwal, President, ISODA.
According to Aggarwal, there are concerns about applicability of TDS and countervailing duty (CVD)—especially on OEM license packs. "A few tax consultants are advising us to deduct TDS on all payments made to distributors for purchase of pre-packed software and pay the appropriate TDS value to the government, even if the Service Tax is not levied on the invoice.”
Harinder Salwan, Secretary, ISODA, added, "Service Tax continues to be levied on paper licenses, and we also have to cough up both VAT and Service Tax. On retail boxes with multiple-user licenses, the current understanding is that CVD, Service Tax and VAT all need to be levied. Only single-user license packs can be exempted."
Clarifying further, Salwan added, "Custom officials will demand the CVD on the software for a retail pack. Being a multiple user pack, the retail pack does warrant service tax. Since software is classified as goods by the Sales Tax department, VAT payments need to be paid as well. More over, in such cases, the customer will cut TDS on the product."
Salwan informed that Autodesk has already clarified that all three taxes are likely to be levied on future imports, and this would increase software prices on multi-user retail packs by another 12-13 percent.
"Similarly, service tax is still applicable on electronic licenses and on license renewals," added Aggarwal.
ISODA leadership is now betting on the outcome of the case filed in Chennai High Court. There is expected to be another hearing on March 15, 2010. "Our lawyers are confident of getting an injunction in our favor, but we need to wait and watch," concluded Aggarwal. |