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Is Software Goods or Services under GST?


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 GST rate. 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 find GST Rate 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.

Click here to read on GST on Alcohol, Mineral Water, Juices and Beverages

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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