Is Computer Software a Good or a Service?

Goods or Services? Understanding the Classification of Computer Software under GST

Introduction:

The classification of computer software as either a good or a service has been a contentious issue for businesses since the service tax regime. However, the Goods and Services Tax (GST) Act has provided some much-needed clarity on the matter.

Classification of Computer Software:

According to the GST Act, computer software is categorized as either “normal software” or “specific software”. Normalized software refers to pre-designed software that is available off-the-shelf in retail outlets. It can be supplied in any medium or storage (such as a CD-ROM or through the use of encryption keys) and is treated as a supply of goods. On the other hand, specific software is customized to the specific requirements of the customer and includes development, design, programming, customization, adaptation, upgradation, enhancement, and implementation of information technology software or permitting the use or enjoyment of any intellectual property right. Hence, it shall be treated as a supply of services.

Conclusion

In conclusion, it can be said that the classification of computer software as either a good or a service depends on whether it is an off-the-shelf product or a customized product. It is important for businesses to understand this classification to determine the appropriate tax treatment for their software-related transactions under the GST Act.

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Chintan Doshi

Principal Associate | VCFO | [email protected]

Focuses on financial planning, cash flow management, budgeting, and strategic advisory. Brings extensive experience in audit, assurance, and corporate advisory to drive growth and stability for startups and established businesses.