Service Tax on Information Technology Software

 Information Technology Software service has been subjected to service tax with effect from 16^th May 2008 with the Government notifying the date of amendments by the Finance Act 2008 in the Finance Act 1994 which is statutory  provision for levy of Service Tax. The date of 16^th May 2008 has been notified vide Notification No. 18/2008 – Service Tax as the date on which the provisions of the Finance Act 2008 related to service tax come into force.

As defined by the Finance Act 2008, “information technology software” means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment.

Further, services provided by a consulting engineer in relation to advice, consultancy or technical assistance in the disciplines of both computer hardware engineering and computer software engineering shall also be subject to service tax.

Taxable Service is service provided or to be provided to any person, by any other person in relation to information technology software for use in the course, or furtherance, of business or commerce, including,—

(i) development of information technology software,

(ii) study, analysis, design and programming of information technology software,

(iii) adaptation, upgradation, enhancement, implementation and other similar services related to information technology software,

(iv) providing advice, consultancy and assistance on matters related to information technology software, including conducting feasibility studies on implementation of a system, specifications for a database design, guidance and assistance during the start up phase of a new system, specifications to secure a database, advice on proprietary information technology software,

(v) acquiring the right to use information technology software for commercial exploitation including right to reproduce, distribute and sell information technology software and right to use software components for the creation of and inclusion in other information technology software products,

(vi) acquiring the right to use information technology software supplied electronically.

As defined by the Finance Act 2008, “information technology software” means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment.

Further, services provided by a consulting engineer in relation to advice, consultancy or technical assistance in the disciplines of both computer hardware engineering and computer software engineering shall also be subject to service tax.

Moreover, the definition and scope of the following taxable services is being amended as a result of on levy of service tax on information technology software service, namely:-

(i) Business auxiliary service [section 65(19)], so as to omit the reference to exclusion of information technology service;

(ii) Consulting engineer service [section 65(105)(g)], so as to omit the exclusion of computer software engineering consultancy and provide that services provided by a consulting engineer in relation to advice, consultancy or technical assistance in the disciplines of both computer hardware engineering and computer software engineering shall also be classifiable under this service;

(iii) Technical testing and analysis service [section 65(106)] so as to specifically include testing or analysis of information technology software;

(iv) Technical inspection and certification service [section 65(108)] so as to specifically include inspection, examination and certification of information technology software;