Since vat is applicable on trading of goods, no service tax is applicable, as it is covered in Negative list
Trading of goods
All types of trading in goods covered in negative list including
- Future contracts
- Forward Contracts
- Commodity futures
However following are not covered in Negative list and hence taxable
- Auxiliary services relating to future contracts or commodity futures:
- Trading in services (Commission services)
M/s. Neem Infotech is selling information technology software as:
(i) Shrink wrap software
(ii) Multiple user software/Paper license and
(iii) Internet download;
retaining the copyright with it.
In terms of End User License Agreement (EULA), the contract is given for customized development of software, delivered online or downloaded on the internet.
The assessee is of the view that since it has been settled by the Supreme Court ruling in TCS case [2004 (178) ELT 22 (SC)] that software (branded as well as unbranded) is goods, there is no element of service, and hence service tax cannot be levied in this case.
Discuss, in the light of case law, if any, the following questions that arise -
(i) Whether the transaction may be called as sale or deemed sale?
(ii) Whether the transaction is liable to service tax? If yes, show the category of the service also.
Since copyright is retained,only right to use goods is transferred and not the goods themselves.
Hence the transaction cannot be called as sale or deemed sale
the transactions in the instant case could not be treated as deemed sale as that requires a transfer of right to use any goods but in the instant case, the goods as such are not transferred.
It is liable for Service tax,
This service is treated as Declared Service under clause (d) of section 66E of the Finance Act, 1994. and hence liable to Service tax