Downloaded software not to attract service tax

If you thought that the Union Budget 2010 would increase the cost for purchasing and downloading a software or an application from the internet, then you thought wrong.

In the immediate aftermath of the Budget’s announcement, there was some confusion whether individual users who downloaded software or applications from the Internet were liable for service tax of 10.3 per cent or not. But tax experts and companies have said that downloading software on to the PC does not make an individual liable for service tax.

“After the series of changes in the Budget with regard to software, an individual is not liable to pay service tax if they are downloading software (music, games, etc) from the net for personal use. This is because the ‘reverse charge principle’ does not apply to individuals,” said Rajiv Dimri, of BMR Advisors.

So, if you use Xbox Live and download games from Microsoft’s site, then you would not be liable to pay service tax.

However, applications that are downloaded onto a mobile handset through a telecom service will attract a service tax of 10.3 per cent.

So, games that are downloaded from Zapak.com or Indiagames.com or any other portal that is accessed via a telecom service provider’s network are liable to attract service tax.