A case study defining import taxes applicable on IT software & licenses Follow the rule
There are two definition’s of IT softwaresPacked software or Canned softwarePackaged software or canned software means a software developed tomeet the needs of variety of users, and which is intended for sale orcapable of being sold, off the shelfCustomized softwareAny customized software (that is to say, any custom designed software,developed for a specific user or client)
NotificationNo. 80/2009 – Customs New Delhi, the 7th July, 2009G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 25 of theCustoms Act, 1962 (52 of 1962), the Central Government, on being satisfied that it isnecessary in the public interest so to do, hereby exempts packaged software or cannedsoftware, falling under Chapter 85 of the First Schedule of the Customs Tariff Act, 1975 (51 of1975), from so much of the additional duty leviable thereon under sub-section (1) of section3 of the said Customs Tariff Act, as is equivalent to the duty payable on the portion of thevalue of such goods determined under section 14 of the said Customs Act, or the rules madethereunder, read with sub-section (2) of section 3 of the said Customs Tariff Act, whichrepresents the consideration paid or payable for transfer of the right to use such goods:4.Provided that the transfer of the right to use shall be for commercial exploitation includingthe right to reproduce, distribute and sell such software and right to use the softwarecomponents for the creation of and inclusion in other information technology softwareproducts:5.Provided further that the importer shall make a declaration to the Assistant Commissionerof Customs or the Deputy Commissioner of Customs, as the case may be, in respect of suchtransfer of the right to use for commercial exploitation:6.Provided also that the importer shall be registered under section 69 of the Finance Act,1994 read with rule 4 of the Service Tax Rules, 1994.Explanation. - For the purposes of this exemption, “packaged software orcanned software” means software developed to meet the needs of variety ofusers, and which is intended for sale or capable of being sold off the shelf.
85.1 Exemption has been provided to packaged or canned software,subject to specified conditions, from so much of the additional dutyof customs leviable thereon under subsection (1) of section 3 of theCustoms Tariff Act, 1975 as is equivalent to the duty payable on theportion of the value which represents the consideration paid orpayable for transfer of the right to use such software. Service tax ischargeable on this portion of the value under the InformationTechnology Software Service. The exemption from additional customsduty is available only if the importer is registered as a Service Taxassessee under the provisions of Finance Act, 1994. For fulfilling thiscondition, the importer may be asked to furnish a copy of Service Taxregistration. [Notification No. 80/2009-Customs refers].
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