Suggestions on GST Acts (July 2017) by Institute of Chartered Accountants of India
5. Sale of Canned software not included as services
Section 2(52) of CGST Act, 2017 defines goods as ‘every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply’.
Further section 2(102) defines services as “anything other than goods”
Issue
1st Model GST Law specifically contained an Explanation in the definition of goods which clarified that goods do not include intangible property. The definition of services also contained a similar Explanation to the effect that service includes intangible property. Hence, it was made very clear that software in any form is always classifiable as a service and not goods.
However, the Explanations cited aforesaid have been deleted in the CGST Act. It has only been specified in Para 5(d) of Schedule II that development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software is a service. The deeming provision in Schedule II is a replica of what we have in Clause 66E of the
Finance Act, 1994 which deals with Declared Services.
The deletion of the aforesaid Explanations would once again raise the long-standing
classification dispute as to whether sale of shrink wrapped software or canned software is a supply of good or service.
Suggestion
It is suggested that an explanation as provided in Model GST law to the definitions of Goods as well as Services be restored.
Read ICAI Suggestions on GST Act to Govt : July 2017
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