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Presentation for Nasscom Indirect Taxes S. Madhavan 31 st March, 2006 – New Delhi Agenda Impact of budgetary changes for the IT sector Hardware Classification Computer, printers, input output devices, CPU, monitors and drives are classifiable under Heading 84.71

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Presentation for Nasscom Indirect Taxes

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Presentation for Nasscom

Indirect Taxes

S. Madhavan

31st March, 2006 – New Delhi


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Agenda

Impact of budgetary changes for the IT sector


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Hardware

Classification

  • Computer, printers, input output devices, CPU, monitors and drives are classifiable under Heading 84.71

  • Parts and accessories of computers are classifiable under 84.73 (PCBs, motherboards, Ink spray nozzle etc.)

    Valuation

  • Based on transaction value (i.e. selling prices)


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Software

Classification

  • Based on media in which software is stored:

    • If in printed form will be under Chapter 49

    • If in other media will be under Heading 85.24

  • Chapter Note of Chapter 85 states that media of Heading 85.24 will be classifiable under that Heading even if presented with apparatus for which they are intended

  • Therefore, software in media under 85.24 will remain classified as such even if sold together with computers

  • However, etched, burnt and embedded software is classifiable as per the relevant hardware i.e. 84.71


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Pre Budget Position

Hardware Duty Rates

* In terms of Computer (Additional) Duty Rules

** In lieu of sales tax / VAT for ITA goods


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Pre Budget Position

Software Duty Rates

  • All kinds of information technology software, in any media, chargeable to NIL Customs and Excise duty

  • Other software chargeable to customs duty at 4% and NIL excise duty


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Post Budget Position

Hardware Duty Rates


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Post Budget Position

FM Speech

“I propose to impose an 8 percent excise duty on packaged software sold over the counter, customized software and software packages downloaded from the internet will be exempt from this levy.”

Chapter Heading 8524 - Tariff rate 8%

8524 - Records, tapes and other recorded media for sound or other similarly recorded phenomenon, including matrices and masters for the production of records, but excluding products of Chapter 37

Exemption

Any customized software (that is to say, any custom designed software, developed for specific user or client), other than packaged software or canned software.

Explanation- For the purpose of this entry, “ packaged software or canned software “ means a software developed to meet the needs of variety of users, and which is intended for sale or capable of being sold, off the self


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Post Budget Position

Software Duty Rates


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Pre Budget Position

Maintenance and repair under service tax


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Post Budget Position

Service tax

  • Computerized data processing and maintenance of computer software excluded from “information technology”

  • Computerized data processing taxable under

    • business auxiliary services;

    • support services of business or commerce; and

    • banking and financial services

  • ERP exemption withdrawn

  • Exemption on call centre and medical transcription withdrawn


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Thank You


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