Gov Supports Packaged Software Import Tax Cut
The government will finalize its stance on the taxability issue of packaged software import, within a week’s time.
According to sources, the government has decided to go in favor of the industry, and plans to relax the current taxation structure.
The government will take its decision based on the recommendations of the Emerging Issues Task Force, which will advise it on international tax issues. The committee has been appointed by the Central Board of Direct taxes (CBDT), and is headed by Vijay Mathur.
The task force has even recommended exempting the import of packaged software from income tax completely.
The Income-Tax Appellate Tribunal (ITAT), Bangalore, has stressed that imports are not transactions in copyrights, but only a purchase of copyrighted products, and hence not taxable. In stark contrast, the I-T department’s stand is that payments for the import of software is royalty, and tax is deductible under Section 115 A. The tax payable is at the rate of 20%.
To strengthen its stance, the income-tax department has recently issued notices, asking resellers to deduct tax while making payment to non-residents from whom they had imported software products such as Microsoft Office.