GST INDIA DAILY

SCOPE OF SUPPLY SERIES – PART 10

Last week we have gone-through the several topic SCHEDULE II services under GST. Read Part 9 of Scope of Supply under GST, in the following link:

https://wordpress.com/read/blogs/170704436/posts/688

In this article we shall see the following entries which are to be treated as supply of service in detail:

1. temporary transfer or permitting the use or enjoyment of any intellectual property right;

1. development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software

1. Temporary transfer or permitting the use or enjoyment of any intellectual property right:

 The term ‘Intellectual Property Right’ (IPR) has not been defined in GST Act.

The creator of IPR temporary transfers the right to use of any Intellectual Property Right (IPR) is a supply of services. He may permit the use or enjoyment of IPR to others for consideration.

Intellectual Property Right is a property of a creator and if the creator permanent transfers the right on property, it is considered as a supply of Goods.   

For Example: If Mr A transfers the copyright of his book temporarily it will be considered as supply of service. However he makes the same as permanent transfer, then the same will be treated as supply of goods.

To conclude, both the permanent transfer of IPR and temporary transfer are subject to GST. Temporary transfer includes permitting use or enjoyment of IPR.

• development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software:

Similar to the above entry, this entry also  can be classified as supply of goods or service depending upon the nature of transfer.

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.

Though the CGST Act defines the development of software as ‘service’, software in physical form (branded as well as tailor-made), ‘Information Technology Software’ is ‘goods’ in Customs Tariff Act under heading 8523 80 20

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.

In the latest advance ruling to Solize India Technologies Private Limited (GST AAR Karnataka), the company re-sells pre-developed or pre-designed software which are made through the use of encryption of keys. However these are not customize.

The authority of advance ruling has concluded that, the supply of software supplied by the applicant which is not designed and developed specific to any customer and sold without any customisation, qualifies as “supply of goods” and “supply of computer software as goods”

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MANIMARAN KATHIRESAN ( ON BEHALF OF GST INDIA DAILY TEAM)