Also Read - Buying Home For First Time? Here’s How You Can Avail Income Tax Benefits | Details Here
There are several areas of conflict in the taxation of packaged software in various Acts. There is a need to address these through proper clarifications. This will reduce the burden on consumer who support the industry and will help in simplifying the sales chain: Also Read - CBDT Extends Deadline to File 'Audit ITRs' From September 30 to October 31
1. Packaged software is treated on par with royalty under the Income Tax Act. This conflicts with other indirect tax laws which treat the same software as goods, thus leading to TDS on revenue. This practice seems unfair as the industry has cost structure similar to any other tangible product. As a result, it reduces the cash flow in the hands of trade. Packaged software works on the same basis and the same channels as hard IT products, like laptops. Yet, computer purchases do not trigger a withholding tax, as in packaged software. Packaged software is different from software services. Also Read - Corporate Tax Rates For Domestic Firms to be Slashed to Promote 'Make in India': Nirmala Sitharaman
2. There is lack of clarity in the definition of R&D relative to software products, which leads to non-availability of this weighted deduction.
3. There is a charge of Service Tax as well as a VAT on packaged software, which makes the product expensive due to double taxation relative to other IT products. This needs to be addressed, a Uniform GST will address this, of course.
CFO, Quick Heal Technologies Pvt. Ltd.