Question: Can you confirm the SAC codes under GST for
- Sale of Software License : Perpetual
- SaaS of rental of software license including hosting
- Providing support services for own software licensed to customers ( AMC or incidence basedO
- Providing customization services for above
Answer:
Sl. | Description | HSN | Entry description | Group and Heading |
1 | Sale of Software License: Perpetual | 997331 | Licensing services for the right to use computer software and databases; | Leasing or rental services concerning machinery and equipment with or without operator under the heading ‘Leasing or rental services with or without operator’ |
2 | SaaS of rental of software license including hosting | 997331 | Licensing services for the right to use computer software and databases; |
3 | Providing support services for own software licensed to customers (AMC) | 998313 | Information technology (IT) consulting and support services | Management consulting and management services; information technology services under the heading ‘Other professional, technical and business services’ |
4 | Providing customization services for above | 998314 | Information technology (IT) design and development services |
Question: We are NASSCOM member and a ITES EOU unit and registered under STPI. Can you tell me do we need to pay GST on Input services? Can you send an updated circular please.
Answer:
GST on goods whether domestic or imported is exempt for STPI units till March 31st 2018. For input services, there is a refund option. For further details, see this post.
Question: Can someone from NASSCOM help how our industry is interpreting Section 13(3) of GST?
Answer:
Section 13(3) of the IGST Act, 2017 provides that the place of supply of the relevant services would be the location where the services are actually performed, where either the supplier or the recipient is located outside India.
A. Services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services.
In case of when services provided from a remote location through electronic means, the location where goods are situated at the time of supply of services would be treated as the place of performance.
Exception: This clause shall not stand attracted in case of services supplied in respect of goods which are temporarily imported into India for repairs and are exported after repairs without being put to any use in India.
- Given the above, where goods are imported into India from an entity to which services in respect of such goods are required to be performed, whether directly from such entity, or through an agent, the place of supply would be India. Accordingly, the transaction would not qualify as an export of services.
- Further, in terms of the proviso, if the person providing services is located outside India, say fixing bugs in a software application, and is performing the activity from his place of business, if the location of the recipient is in India, and the goods are lying with the recipient himself, the transaction would qualify as an import of service.
B. Services supplied to an individual (represented either as himself or a person acting on his behalf), requiring their physical presence with the supplier for the supply of services.
- Where a service requires the recipient or his representative to be physically present with the supplier, whether in the supplier’s place of business, or at any other location, and one of the two is located outside India, the place of supply would be the location where the service is actually performed.
Question: If services are delivered from India to overseas client and payment received is in hard currency, will that be treated as exports with no-tax obligation or will IGST be applicable?
Answer:
For a service to qualify as an export, the service must fulfil all of the following conditions, cumulatively:
- The supplier of service is located in India;
- The recipient of service is located outside India;
- The place of supply of service is outside India;
- The payment for such service has been received by the supplier of service in convertible foreign exchange; and
- The supplier of service and the recipient of service are not merely establishments of a distinct person.
So long as all of the aforesaid 5 conditions are satisfied, and the consideration for the service, understood to be received in hard cash, is in freely convertible foreign exchange, the services so delivered from India to overseas clients would qualify as exports, and would enjoy the benefit of the tag ‘zero-rated supplies’ in terms of Section 16 of the IGST Act, 2017. Accordingly, the supplier of service in India can make the export of service without payment of IGST by executing a letter of undertaking in terms of Rule 96A of the CGST Rules, 2017, or, alternatively, export the services on payment of IGST (through electronic cash / credit ledger) which can thereafter be claimed as a refund.
Question: What is the correct GST classification for BPO export services?
Answer:
Business Process Outsourcing (BPO) services would be classifiable under the Chapter Heading 9983 as Other professional, technical and business services, under the group 99831 – Management consulting and management services; information technology services. Under this group, the service would be more specifically classifiable as any one of the following, based on the nature of BPO services provided:
1 | 998311 | Management consulting and management services including financial, strategic, human resources, marketing, operations and supply chain management |
2 | 998312 | Business consulting services including public relations services |
3 | 998313 | Information technology consulting and support services |
4 | 998314 | Information technology design and development services |
5 | 998315 | Hosting and information technology infrastructure provisioning services |
6 | 998316 | Information technology infrastructure and network management services |
7 | 998319 | Other information technology services nowhere else classified |
To further clarify, the above classification would hold good, regardless of whether the supply is an intra-State supply / inter-State or export supply
Question: We would like to have information regarding benefits of having MSME registration. We are having EM II registration (refer attachment) with District Industry Centre, Vadodara.
Answer:
Not sure if you are looking for some specific scheme or benefits generally.
In both cases I would like to request you to visit the MSME website for details as we do not have any in-house insights on this.
Some relevant links are provided below:
http://msme.gov.in/
http://msme.gov.in/sites/default/files/Sch-vol1-151214.pdf-sri.pdf
Question: We have one query with reference to the FAQs circulated.
Question 11 of the FAQs: I am an Indian Company who makes software and sells it outside the country. I have hired a firm (not a related party) ‘C’ located abroad to facilitate the supply of software in Europe and the USA; would I be liable to pay GST on the payments that I make to this entity abroad?
While the answer to this question is “No”, we are curious as to why “not a related party” is given within brackets.
The fact that it is a related party should not make any difference to whether GST is applicable or not.
Based on our understanding the following is the definition of Intermediary under GST:
“intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.
There is no specific mention about a related party in the definition of intermediary.
In summary, our question is whether GST is chargeable if the intermediary is a related party.
Answer:
No. It will not be liable to GST under RCM. The place of supply of intermediary services is the ‘location of the intermediary’ which would be outside India, in the instant case – accordingly would not be liable to GST.
Note – there is no relevance of the relationship of the supplier with the recipient of service, for determining whether the supply qualifies as a taxable service – except where the service lacks consideration.
Additional comments: With reference to the sectoral FAQ (Q.11), while the question provides that the intermediary is not a related person, the answer / justification for the conclusion in the answer does not draw reference to the fact that the intermediary not a related person.
Question :
We import software licenses from our parent company in Germany and sell them in India through Ingram and channel partners as a physical media (CD) product, which attracts 18% IGST. The software requires a key to unlock the license. HSN code is 85238020.
We also sell software maintenance subscription which used to attract 15% Service Tax in the old regime. Now, it is 18% IGST. Since it is a subscription, it is a service, but we are not sure of the SAC code. So, we ship the subscription license on media, incurring FedEx shipping cost unnecessarily and we use HSN 85238020 for it also.
It will be helpful if you can give examples for input tax credits in the context of a software product and a software development company. For example, if a company located in Noida hosts a trade event at a hotel in Bangalore, can credit be taken against the GST paid, etc.
Answer:
Licensing of off-the-shelf-software through CDs, would be classifiable under HSN 8523. However, in other cases, it would be treated as supply of services, under the category Licensing services for the right to use intellectual property and similar product under the group 99733 in the scheme of classification of services. Please refer to the attached FAQs for more details.
On your second query on input tax credit:
Prima facie, NO, the GST paid on the hotel invoice in Karnataka cannot be claimed as credit in UP.
Only the following types of GST can be availed as credit in UP:
- IGST charged by any supplier (outside UP) – inter-State inward supplies
- CGST and SGST charged by a supplier located in UP – intra-State inward supplies
- IGST paid on import of goods or services by the company under RCM
- SGST and CGST paid by the intra-State inward supplies paid under RCM
The invoice issued by the hotel in Bangalore would contain CGST and SGST payable in the State of Karnataka – it would not qualify for ITC in UP.
Additional comments: If the company registers in Karnataka as an ISD (input service distributor), it may claim the credit in Karnataka (ii) transfer the credit to UP through a transfer invoice and (iii) claim the credit in UP based on the said transfer invoice.
