ISODA On Budget 2013: Dual Levy Of VAT & Service Tax On Domestic Software Sales Remains Unaddressed | News |


ISODA On Budget 2013: Dual Levy Of VAT & Service Tax On Domestic Software Sales Remains Unaddressed

Added on Mar 05, 2013 by Yogesh Gupta, Channelworld India

The union budget for the financial year 2013-14 has received varied response from industry experts and ordinary citizens alike. The same seems to be the case with the Infotech Software Dealers Association (ISODA), which feels that the budget is a mixed bag, both from the perspective of its association members and that of the IT industry in general. Biren Shah, the chairman of ISODA, says, “The budget has maintained status quo on current rates of tax rates for customs/excise/income tax/service tax. Since the industry is burdened by high incidence of taxation due to double taxation, we would have liked to see lowering of tax rates.” He, however, adds, “We see stable tax rates a positive for simplicity and planning purpose.”

ISODA, a pan-India association with 125 plus partner organizations, comprises of the software channel—distributors, VARs and systems integrators—selling to SMBs and enterprises across India. ISODA members, in entirety, contribute to the tune of 40 percent of total software sales in India, and hence the budget implications for this set of partners become vital for the Indian IT industry.

Also Read -
Budget 2013: India's Tech Industry Responds

Service Tax Woes

Getting into the details of the taxation structure, Shah is disappointed that dual levy of VAT and service tax on domestic software sales has not been addressed. The issue of multi-level TDS exemption on all IT Products and Services except Software has not been addressed either, he worries.

Another area that has been left unaddressed according to Shah is the industry's demand to clarify whether 100 percent input Cenvat credit would be available to the reseller when service tax is paid at the time of purchase of software for subsequent sale (trading).

Positive Initiatives Included

Coming to the positive side of the budget, Shah opines that the Tax Administrative Reform Commission is a good initiative to review tax implications. “We truly expect the commission to review the policy content and its practicality in implementation, and provide the feedback to enable businesses run with minimal disruption,” he says.

Also, ISODA is supportive of the government’s focus on innovation which includes setting up an Rs 200 crore fund for fuelling local innovations. “This will encourage the innovation ecosystem in the country. Additionally, the budget also brings in lot of positive initiatives for the important MSME sector with announcements on listing on MSME exchange (without IPO), non-tax benefits and no tax for MSMEs that move to large enterprise class. These are significant incentives for MSMEs to invest in growth and become globally competitive,” says Shah.

Additionally, the Service Tax Voluntary Compliance Encouragement Scheme 2013 will give amnesty to assessees who have not paid their taxes or filed returns. This is a welcome move for those dealers who were not aware of collection and payment of service tax on software products, says Shah.

Another addition to take heart from would be the New Section 90 which would specify and differentiate cognizable offences from non-cognizable offences. Section 91 is being introduced to provide for power to arrest under Service Tax law.

Direct Tax and More

Talking about direct tax and the likes, Shah says, “TDS exemption limit of Rs 30,000 per year has remained unchanged. The industry would have liked to see this limit being increased to a higher amount.”

Under Section 115A, the rate of withholding tax for royalties and fees for technical services payable to non-resident has been increased from the current 10 percent to 25 percent in the budget. “The increase in WHT rate will impact the industry on international payments to non-tax treaty countries. Since India has Double Taxation Avoidance Agreements (DTAA) with 84 countries, this increase may not have much impact for foreign suppliers registered with Indian tax authorities,” informs Shah.

The benefit of Advance Ruling Authority is being extended to resident public limited companies w.e.f. 1-3-2013. This will help in reducing litigation as every organization has to get its service tax registration updated, as per the new norms, says Shah.

On the whole, ISODA sees opportunities in this stable tax regime and investments in social sectors, but there are still some concerns on continuous high inflation resulting in unfavorable exchange rates and resultant higher prices of imported software. There seems to be no major announcement for the Indian software products industry, and in that sense, there are missed opportunities as well, sums up Shah at ISODA.

Yogesh Gupta is the Associate Editor of ChannelWorld India. Send your feedback to


Try These 5 Undiscovered Google Drive Tricks

Google Drive and its attendant apps offer a wealth of tools to help you be more productive. Try these five for the biggest boost.

What Does the Collaborative Economy Mean for Information Security?

Most employers allow their staff reasonable use of office products such as telephones, copy machines, coffee and the like. For the most part, employees won't be using the copy machines to compete with Kinko's or a company car to compete with black car limousine services. Well, at least not until now.

Tech Chat

Collaborating To Outcome Based World: Priyadarshi Mohapatra, Avaya

Priyadarshi Mohapatra, Managing Director, India and SAARC, Avaya, on how IT is transitioning from a keep-the-lights-on role to one that enables customers to deliver results.

The Dawn of the Digital Age: Akhilesh Tuteja, KPMG

The development of digital infrastructure will be a key growth driver for technology and solution providers. 

Paradigm Shift from End-Users to User-First : Parag Arora,Citrix

Parag Arora, Area Vice President and India Head, India Sub-continent, Citrix, says new technologies will force organizations to take a user-first approach in 2015.

Mobile and Cloud Are Gamechangers of the Future: Karan Bajwa, Microsoft

Karan Bajwa, Managing Director, Microsoft India, says, in  2015, organizations will adopt a mobile-first and cloud-first strategy to get ahead of competition.

A Network for the Internet of Everything : Dinesh Malkani,Cisco

Dinesh Malkani, President, India and SAARC, Cisco, talks about IoT and the significant technology transitions in the networking world.

Moving to the Third Platform: Jaideep Mehta, IDC

Cloud and mobility are the two technologies that will fuel the rapid adoption of the third platform in India.

Envisaging a Holistic Security Strategy For 2015: Sanjay Rohatgi,Symantec

Sanjay Rohatgi, President–Sales, Symantec India, says the company has a set of holistic solutions in place to secure organizations from security threats. 

Beating the Bad Guys: Sivarama Krishnan, PwC

Organizations will need to turn inwards to establish robust information security strategies.

Building Capabilities for a Digital Tomorrow: Alok Ohrie,Dell

Alok Ohrie, President and Managing Director, Dell India, on the company’s investments to build end-to-end solutions and delivery capabilities for a digital world.


CEO Comebacks: For Better or for Worse?

We bring to you six global CEOs who made the idea work, or not.

Datacenters in the Weirdest Places

A peek into some of the most unusual datacenter locations in the world. Here are 13 datacenters that are built in unusual locations like mines, ships, trucks and even a nuclear collidor. Taking about common wisdom, eh?

12 LinkedIn Mistakes IT Pros Make

LinkedIn is the go-to place for IT pros to market themselves, connect with co-workers, find former colleagues, and meet-up with like-minded folks. Take a few minutes now to make sure your profile showcases your accomplishments, and skills. Here are some common mistakes to avoid.

ChannelWorld Survey: State of the Market 2014

Partners poll their sentiments, expectations, pain points, and challenges for the coming year.

6 Leaders Who Headed for an Abrupt Exit

The abrupt exit of top leaders of Indian and global tech companies this year, with many of them citing ambiguous reasons, surprised the technology world.


Kamtron Systems

Transitioning towards a service-oriented company will boost our growth, believes Kavita Singhal, director, Kamtron Systems.

TIM Infratech

Delivering ‘best of breed’ technologies to enterprises is key to success, says Monish Chhabria, MD, TIM Infratech

Mudra Electronics

A vendor-agnostic strategy helped us sustain business, says Bharat Shetty, CMD, Mudra Electronics.

Systematix Technologies

Our USP is a customer-friendly approach backed by services, says Akhilesh Khandelwal, Director, Systematix Technologies.

CorporateServe Solutions

Our ability to turnaround complex ERP projects in record time is what gets us customer referral, says Vinay Vohra, Founder & CEO, CorporateServe Solutions.

KernelSphere Technologies

We are emerging as an end-to-end systems integrator, says Vinod Kumar, MD, KernelSphere Technologies.

Uniware Systems

We constantly validate emerging technologies for first-mover advantage, says Vergis K.R., CEO, Uniware Systems.

Astek Networking & Solutions

An innovative approach helps us stay successful, says Ashish Agarwal, CEO, Astek Networking & Solutions.

CSM Technologies

Our approach is backed by innovation and simplicity, says Priyadarshi Nanu Pany, CEO, CSM Technologies.


Partnering for Profitability

Atul H. Gosar, Director, Network Techlab, shares how the company’s association with EMC has provided it with a competitive edge and a wide customer base, leading to increased profitability.

Sponsored Content

Promising Pipeline

Venkat Murthy, Prime Mover, 22by7 Solutions, shares how EMC brings in competitive edge by enabling technology, GTM and lead generation, helping 22by7 acquire new customers and retain old ones.

Sponsored Content

Powerful Performance

Deepak Jadhav, Director, VDA Infosolutions, says initiatives by EMC around training and certification have helped the company’s staff improve its performance and enhance customer experience.

Sponsored Content

Performance Booster

Rajiv Kumar, CEO, Proactive Data Systems, says that the solution provider’s association with EMC has helped expand its customer base and added value to existing offerings.

Sponsored Content

Pursuit of Profitability

Santosh Agrawal, CEO, Esconet Technologies, shares insights on how the systems integrator’s association with EMC has spelled sustained success over the years.

Sponsored Content

Non-Performance is Not an Option

Nitin Aggarwal, Director, Trifin Technologies, shares insights on how the association with EMC has helped the system integrator stand out and empowered its personnel to deliver consistent performance.

Sponsored Content


Signup for our newsletter and get regular updates.