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I am m a software engineer and engaged in the business of developing and designing Web sites for various companies.

Does `Web designing' come under the service tax net? If yes, under which category of taxable service?

Prakash R., e-mail

Service tax is applicable on taxable services, that is, a service falling under Section 65(105). If any service falls under any of the clauses of sub-section 105 of Section 65, it shall be a taxable service.

There is no specific category of taxable service as Web designing. There could possibly be two service categories — consulting engineer and business auxiliary — wherein the business of developing and designing Web sites for various companies may fall.

In the case of consulting engineer's services, taxable service means any service in relation to advice, consultancy or technical assistance in one or more disciplines of engineering but not in computer hardware or software engineering.

Since Web site development and designing involves software engineering, it will not get covered.

Providing content development to Web sites is akin to writing a book which is not subject to service tax.

In the case of business auxiliary service, designing, developing or maintaining a computer software, computerised data processing or system networking, or any other service primarily in relation to operation of computer system are excluded from the definition under Section 65((105)(19). In view of this, it can be said that service tax is not leviable in the case of Web designing under consulting engineer services.

However, Finance Act, 2007 has introduced a new category of taxable service w.e.f. June 1, 2007, that is, development and supply of content service under Section 65(105)(zzzzb). Accordingly, Web designing and content development and its supply shall be taxable from a notified date, that is, June 1, 2007, if it relates to development and supply of content on a Web site. Development of software will not be taxable but the content portion will be.

Sanjiv Agarwal

Send in your queries to MentorAtYourService@gmail.com

http://MentorQA.blogspot.com

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