Pre-developed and Pre-designed Computer Software can be Treated as ‘Goods’ and attracts 5% GST: AAR [Read Order]

The Karnataka Authority for Advance Ruling has held that pre-developed and pre-designed Computer Software can be treated as goods and attracts 5% GST.

The applicant, M/s Keysight Technologies India Pvt. Ltd are engaged in the supply of scientific and technical equipment and time based and perpetual software licence to Public Funded Research Institutions recognized by Government of India; that in some cases they supply equipment along with software and in some other cases they supply standalone software. All the software whether embedded in product or downloaded from website of the applicant, requires a licence to be activated through a licence key.

The applicant approached the Advance Ruling Authority for clarifying that whether the Computer Software supplied by the applicant qualifies to be treated as ‘goods’ and covered Notification No: 45/2017 IGST and consequently, the concessional GST rate of 5% is applicable.

The applicant by relying the decision of Supreme Court in the case of Tata Consultancy Service Vs.  State of AP submitted that their supply of software licence qualifies to be “Supply of Goods” on the grounds that as per the explanatory notes to the scheme of classification of services the SAC 997331 excludes the services of limited end-user licence as part of packaged software. The applicant further submitted that the said supply is entitled for concessional rate of GST at 5% in terms of the Notification No: 45/2017.

The Authority observed that the software supplied by the applicant is pre-developed and pre-designed software and made available through the use of encryption keys and hence it satisfies all condition of the definition ‘goods’. Further observed that goods which are supplied by the applicant cannot be used without the aid of the computer and has to be loaded on a computer and then after activation would become usable and hence the goods supplied qualifies to be “Computer Software” and more specifically cover under “Application Software”.

The Coram of Dr. M. P. Ravi Prasad and T. Kiran Reddy has held that “the software supplied by the applicant qualifies to be Computer resulting in supply of ‘goods’ and the benefit of Notification No: 45/2017 are applicable to the computer software supplied by the applicant to the institutions given in the notification, subject to fulfillment of the condition of the notification, in each case”.

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