Is Software Goods or Services under GST?

The Information Technology Industry is one of the biggest contributors to the economy in India. Many businesses in India largely involves developing and selling

GST software to persons and companies in India and abroad. With the implementation of GST, many Entrepreneurs wonder if software must be classified as goods or service on a tax invoice and the associated 1. In this article, we clarify if a software is goods or service under GST.

GST Rate for Software Development

Software is a set of instructions that allows hardware to function and perform computations in a particular manner. In GST, the development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software is termed as supply of service, attracting 18% GST rate. Click here to 1 in India for various goods and services.

Software in Physical Form is Goods under GST

Though software development in GST classified under services, any software in the physical form of Information Technology Software (branded as well as tailor-made) shall apply as goods under the Customs Tariff Act with HSN Code 8523 80 20. The GST rate for software sold in physical form is also 18%. The above stand on software has been clarified and confirmed by various Courts. In the case of Tata Consultancy Services v. State of Andhra Pradesh, it has been held that canned software which is sold in packages or CDs or DVDs or USB Drivers will be classified as goods. Though the copyright of the program would remain with the development company, the moment copies are made and marketed, it would be termed as goods.

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Transfer of Software Intellectual Property Rights shall apply as Service

Temporary or permanent transfer or permitting use or enjoyment of a software Intellectual Property Rights will be classified as a service under service group 99733. 18% GST rate shall also for transfer or royalty payment received for transfer of IPR relating to software.

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Frequently Asked Questions

Common questions about Is Software Classified as Goods or Services Under GST?.

The GST rate for development, design, programming, customization, adaptation, upgradation, enhancement, and implementation of information technology software is 18% as it is classified as a supply of service under GST.

Software development is classified as a service under GST and attracts 18% GST rate. However, if the software is sold in physical form (such as CDs, DVDs, or USB drives), it is considered goods under the Customs Tariff Act and also attracts 18% GST.

The temporary or permanent transfer or permitting the use or enjoyment of software intellectual property rights is classified as a service under service group 99733 and attracts 18% GST rate.

No, there is no difference in the GST treatment for branded or tailor-made software. As long as the software is sold in physical form, it is considered goods under the Customs Tariff Act and attracts 18% GST.

The HSN (Harmonized System of Nomenclature) code for software sold in physical form under GST is 8523 80 20, which falls under the Customs Tariff Act.

Yes, in the case of Tata Consultancy Services v. State of Andhra Pradesh, it was held that canned software sold in packages or CDs, DVDs, or USB drives will be classified as goods, even though the copyright of the program remains with the development company.

No, the article does not mention any different GST rate for software services provided to clients abroad. The standard 18% GST rate applies to software development services, regardless of the client's location.

The article does not provide information on the GST treatment of other IT-related services. It specifically addresses the classification of software development and the sale of software in physical form under GST.

The article does not mention the GST treatment of open-source software specifically. It focuses on the GST implications for commercial software development and sales.

The article does not discuss the impact of GST on software costs for businesses. It primarily clarifies the classification of software as goods or services and the applicable GST rates.