Financial Daily from THE HINDU group of publications
Sunday, Dec 28, 2003
Financial Daily from THE HINDU group of publications Sunday, Dec 28, 2003 |
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Software Info-Tech - Taxation No service tax for software maintenance K.R.Srivats
New Delhi , Dec. 27 ANNUAL maintenance contracts entered into for maintenance of software would not attract service tax. The Finance Ministry has made it clear through a circular that maintenance of software would not be chargeable to service tax. This circular of the Revenue Department spells good news especially for those organisations that are engaged in design, development and maintenance of software and enter into annual maintenance contracts. The department has pointed out that service tax exemption has already been granted for maintenance or repair services with regard to computers, computer systems and computer peripherals. This exemption had been granted through a notification issued on August 21. The department has now held that computer software would form a part of the computer system and therefore maintenance of software would not attract service tax. It has held that the service tax exemption on maintenance of software would be available under the same August 2003 notification. The circular also highlighted that taxable services provided to any person by a consulting engineer in relation to computer software is already exempt from service tax. Further, the department has pointed out that the definition of "business auxiliary service" also specifically provides that maintenance of software is covered in information technology (IT) service, which is excluded from the scope of business auxiliary service. Business auxiliary services were brought under the service tax net with effect from July 1. The Government had through the Finance Act 2003 imposed service tax on seven new services including commercial training and coaching centres, business auxiliary services, Internet café, franchise service and maintenance and repair service.
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