The taxation of software in India

In India, multiple indirect taxes are levied on software transactions, including excise, customs, value added tax (VAT) and service tax. Excise is charged on the event of manufacture, customs on the import of goods into India, VAT on the sale of goods, and service tax on the provision of notified services.

Given that the definition of goods is not common across the indirect tax categories and that goods and services are not defined in mutually exclusive terms, software taxation in India has some peculiarities and overlaps, particularly because software is intangible.

Software is listed in the excise and customs tariffs (both of which are aligned to the Harmonized System of Nomenclature) as “information technology software” under chapter heading 8523, which covers discs, tapes and other recording media, whether or not recorded.

Rohan Shah is the managing partner and Divya Jeswant is a lawyer at full-service law firm Economic Laws Practice. The firm is headquartered in Mumbai, and has offices in New Delhi, Pune and Ahmedabad.